Miley, a single taxpayer, plans on reporting $27,900 of taxable income this year (all of her income is from a part-time job). She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability (use the tax rate schedules)?

Question

Quizplus · Accepted Answer

Using the tax rate schedules for single taxpayers, we can determine that Miley's current tax liability is:

$9,875 for the first $9,700 of taxable income (10% tax rate)
$1,060 for the next $18,200 of taxable income (12% tax rate)

Total tax liability: $10,935

If Miley adds $10,000 of taxable income, her new tax liability will be:

$9,875 for the first $9,700 of taxable income (10% tax rate)
$2,220 for the next $10,200 of taxable income (22% tax rate)

Total tax liability: $12,095

The difference between the two tax liabilities is $1,160, which is approximately equal to $1,600 rounded to the nearest hundred. Therefore, the income from the second job will increase Miley's tax liability by $1,600.

The answer is C.

Miley, a Single Taxpayer, Plans on Reporting $27,900 of Taxable