Final answer:
The question is about Louis's itemized deductions, including state income taxes, and understanding the basics of taxation, such as taxable income, deductions, tax brackets, and marginal tax rates.
Step-by-step explanation:
The student's question pertains to a scenario where Louis claimed itemized deductions totaling $7,540 on his tax return. Among these deductions, state income taxes accounted for $2,750. Understanding taxation requires knowledge of concepts like taxable income, tax brackets, and marginal tax rates, which are important for both individuals and businesses. Taxable income is calculated after subtracting deductions and exemptions from the adjusted gross income. Tax brackets in the United States determine the amount of federal income tax owed, which increases progressively with higher incomes.
For instance, if a household had a taxable income of $20,000 in 2010, the federal taxes owed could be calculated using the provided formula, resulting in $2,581.25. The marginal tax rate applies to the last dollar earned and defines the tax percentage charged on income within certain thresholds. The concept of marginal tax rate is crucial for understanding how much tax someone pays on their incremental income.