Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.

-Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.By how much is her income tax bill lowered because of the change in the tax rates between 2002 and 2003?

Question

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
 
-Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.By how much is her income tax bill lowered because of the change in the tax rates between 2002 and 2003?

Quizplus · Accepted Answer

According to Table 12-2, in 2002, the tax rate for taxable income between $131,450 and $200,000 is 33%. Hence, Surbhi's tax bill in 2002 would have been:
$50,350 + (0.33 x ($150,000 - $131,450)) = $54,477.50
In 2003, the tax rate for taxable income between $131,450 and $150,000 is 28%. Hence, Surbhi's tax bill in 2003 would be:
$38,915 + (0.28 x ($150,000 - $131,450)) = $52,351.50
Therefore, the amount by which her tax bill is lowered because of the change in tax rates between 2002 and 2003 is:
$54,477.50 - $52,351.50 = $2,126.50
Therefore, the best choice is (C).

Table 12-2 United States Income Tax Rates for a Single Individual, 2002