Question

5. Mallory's total income last year was $24,000, but she could deduct $12,000 for various reasons. Her taxable income equals the amount left over after deductions. If she had to pay 15 percent of her taxable income in federal income tax, which you can calculate by multiplying her taxable income by 0.15, what was her total tax payment?

Answer 1

Answer:

Income taxes do not work this way, you generally pay taxes depending on the tax bracket where you fall into. The first two tax brackets for 2019 (taxes due April 2020) for a single filer are:

Tax rate               Single filer

10%                    $0 to $9,700

12%                 $9,701 to $39,475

Mallory's marginal tax rate = 12%

If Mallory's taxable income after deductions are $12,000, then she will pay:

$9,700 x 10% = $970

($12,000 - $9,700) x 12% = $276

total taxes due = $970 + $276 = $1,246

the effective tax rate = $1,246 / $12,000 = 10.38%