The figure below shows a simplified version of the current Canadian federal income- tax system. The marginal income- tax rates for the four ranges of income are 15 percent, 22 percent, 26 percent, and 29 percent, respectively. FIGURE 18- 2
-Refer to Figure 18- 2. An individual with a taxable income of $39 500 will pay in income taxes.

Question

The figure below shows a simplified version of the current Canadian federal income- tax system. The marginal income- tax rates for the four ranges of income are 15 percent, 22 percent, 26 percent, and 29 percent, respectively.  FIGURE 18- 2
-Refer to Figure 18- 2. An individual with a taxable income of $39 500 will pay in income taxes.

Quizplus · Accepted Answer

First, we need to find out which tax bracket the taxable income of $39,500 falls into. From the chart, we can see that it falls into the third tax bracket, which has a marginal tax rate of 26%.

To calculate the amount of income tax paid, we need to calculate the tax for each tax bracket below the current one and add them up.

For the first tax bracket up to $47,630, the tax paid is 15% x $47,630 = $7,144.50.

For the second tax bracket up to $95,259, the tax paid is 22% x ($39,500 - $47,630) = 22% x (-$8,130) = -$1,788.60 (since the income falls below this bracket, we subtract the amount they would have owed if they had made it into this bracket from what they owe in the current bracket).

For the third tax bracket up to $147,667, the tax paid is 26% x ($39,500 - $95,259) = 26% x (-$55,759) = -$14,510.34.

Finally, for the fourth tax bracket above $147,667, the tax paid is 29% x $0 = $0.

Adding up the tax owed in each bracket, we get $7,144.50 - $1,788.60 - $14,510.34 + $0 = $5925.56, which we round to the nearest dollar to get an answer of $5925.

Therefore, the correct answer is D) $5925.

The Figure Below Shows a Simplified Version of the Current