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Feliz [49]
3 years ago
12

In a certain jurisdiction caroline, who is earning $42,200, currently pays a flat percentage of 25% income tax. The tax authorit

ies suggest a change to a progressive income tac system as follows: 1. Charging 15% on a person's income up to $20,000. 2. Changing 30% on any income above that. How much less will caroline be paying in income tax under the proposed changes? round your answer to the nearest dollar.
Business
1 answer:
NISA [10]3 years ago
6 0

The amount of tax paid less by Caroline as per the new taxation policies will be $950 over her annual salary of $42,200 after the taxes are applied assuming deductions being made.

The calculation of tax saved by Caroline will be done on the basis of comparing the taxation rates of both the policies after taking the changes into account.

<h3>Calculation of tax savings</h3>

The formula for calculation of tax will be done as follows when the taxes are charged on flat basis under the old policy,

\rm Income\ Tax= Salary\ x\ Rate\ of\ Taxation\\\\\rm Income\ Tax= 42200\ x\ {\dfrac{25}{100}\\\\\\\\\\\\\\rm Income\ Tax= \$10550

The taxation for the first $20000 as per the new policy will be

\rm Income\ Tax\ Threshold= 20000\ x\ \dfrac{15}{100}\\\\\rm Income\ Tax= \$3000

Calculating further taxation,

\rm Income\ Tax= 22200\ x\ \dfrac{30}{100}\\\\\rm Income\ Tax= \$6600

So, total taxation as per the new policy will be $9600. Now comparing the taxation of old scheme with new scheme, we get,

\rm Income\ Tax\ Savings= Old\ Taxation - New\ Taxation\\\\\rm Income\ Tax\ Savings=10550-9600\\\\\rm Income\ Tax\ Savings=950

So, the total taxes saved are $950 when the taxation rate changes.

Hence, the correct statement is that tax savings of $950 is possible when the authorities change the taxation rates to such slab rates by Caroline.

Learn more about tax savings here:

brainly.com/question/2396701

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6 0
3 years ago
Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under-
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