Jeffrey is a self-employed carpenter.He bills his clients $60,000 a year.Total business expenses amount to $10,000 a year.His only eligible income tax deduction is $5,000 for an RRSP contribution.If the first $36,000 of taxable income is taxed by the Federal Government at a rate of 15% and levels up to approximately $70,000 are taxed at 22%, what is his federal tax liability before considering tax credits?

Question

Quizplus · Accepted Answer

To calculate Jeffrey's taxable income, we start by subtracting his business expenses and RRSP contribution from his billed income:

$60,000 - $10,000 - $5,000 = $45,000

Since his taxable income of $45,000 falls within the first tax bracket, he will be taxed at a rate of 15% on the first $36,000 and 22% on the remaining $9,000:

$36,000 x 0.15 = $5,400
$9,000 x 0.22 = $1,980

His total federal tax liability before considering tax credits is the sum of these two amounts:

$5,400 + $1,980 = $7,380

Therefore, the best choice is C.

Jeffrey Is a Self-Employed Carpenter