Question

A certain state uses the following progressive tax rate for calculating individual income tax:

Income
Progressive
Range ($)
Tax Rate
0 - 10,000
3%
10,001 - 50,000
5%
50,001 - 100,000
5.5%
Calculate the state income tax owed on a $40,000
per year salary.
tax = $[?1
Round your answer to the nearest whole dollar amount.

Answer 1

Explanation:

To calculate the state income tax owed on a $40,000 per year salary, we need to first determine which tax bracket the salary falls into.

Since $40,000 falls within the range of $10,001 to $50,000, the portion of the salary that is subject to tax at the rate of 5%. We can calculate the amount of tax owed as follows:

Tax owed = (tax rate) x (taxable income)

Tax owed = 0.05 x ($40,000 - $10,000) [Note: we subtract $10,000 to account for the fact that the first $10,000 is taxed at a lower rate of 3%.]

Tax owed = 0.05 x $30,000

Tax owed = $1,500

Therefore, the state income tax owed on a $40,000 per year salary is $1,500.