Answer: a) $3,640.50
b) $1,825.50
Explanation:
The key thing is to note that tax rates vary per income and various income levels have different taxes. In calculating you add up the maximum of the lower level as you move higher up the classes. Let's solve the question to understand.
Total tax liability when taxable income is $31,875:
Tax rate for,
$0 to $9,225 = 10%
= $9,225*10/100
= $922.50
Her income is still higher so we go to the next class,
$9,225 to $31,875 = 12%
= $31,875 - $9,225
= $22,650*12/100
= $2,718
Total tax liability when taxable income is $31,875
= $2,718 + $922.50
= $3,640.50
Now, if the second part-time job is added then total taxable income is $31,875 + $11,400 = $43,275
We go up the classes again,
$0 to $9,225 = 10%
= $9,225*10/100
= $922.50
$9,225 to $38,700 = 12%
= $38,700 - $9,225
= $29,475*12/100
= $3,537
$38,700 to $43,275 = 22%
= $43,275 - $38,700
= $4,575 * 22/100
= $1,006.5
Total tax liability when taxable income is $43,275,
= $1,006.5 + $3,537 + $922.50
= $5,466
Increase in tax liability = $5,466 - $3,640.50
= $1,825.5
Tax liability will increase by $1,825.50 as a result of the second job.
