AC Motors is a sole proprietorship that has taxable income of $94,200.How much additional tax will be owed if the taxable income increases by $14,300 based on the following tax rates? Assume this is the sole source of income for the owner.

Question

Quizplus · Accepted Answer

To calculate the additional tax owed, we need to find the tax on the additional income of $14,300 using the tax rates provided.

The tax rates for a sole proprietorship with taxable income between $85,525 and $163,300 are:

- 24% for the first $85,525 of taxable income
- 32% for taxable income over $85,525

Therefore, the tax on the additional income of $14,300 will be:

($85,525 x 0.24) + ($14,300 x 0.32) = $20,484.

To find the additional tax owed, we subtract the tax on the original income ($94,200 x 0.24 = $22,608) from the tax on the new income ($20,484 + $22,608 = $43,092):

$43,092 - $22,608 = $20,484

So the additional tax owed is $3,432 (which is closest to answer choice D).

AC Motors Is a Sole Proprietorship That Has Taxable Income