2. Taxes paid for a given income level Suppose that Hubert is preparing to file his taxes. He is single and currently lives in Chicago. Hubert earned $205,000 in taxable income in 2022. He reviews the following table, which shows the IRS tax rates for a single taxpayer in 2022. On Annual Taxable Income... Up to $10,275 From $10,275 to $41,775 From $41,775 to $89,075 From $89,075 to $170,050 From $170,050 to $215,950 From $215,950 to $539,900 Over $539,900 The Tax Rate Is... (Percent) 10.0 Hubert calculates that he owes 12.0 22.0 24.0 32.0 35.0 37.0 Based on the IRS table, Hubert calculates that his marginal tax rate is in income taxes for 2022. Hubert then calculates that his average tax rate is when his annual taxable income is $205,000. ▼ , based on the annual income level and the amount of taxes he owes for 2022. After figuring out what he owes in taxes in 2022, Hubert decides to ask an accountant for tax advice. The accountant claims that he has found a legal way to shelter $4,000 of taxable income from the federal government. The maximum amount that Hubert is willing to pay to learn this strategy and reduce his taxable income by $4,000 is (Hint: Sheltering some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income and shelters $10,000 pays income tax on only $40,000.)
2. Taxes paid for a given income level Suppose that Hubert is preparing to file his taxes. He is single and currently lives in Chicago. Hubert earned $205,000 in taxable income in 2022. He reviews the following table, which shows the IRS tax rates for a single taxpayer in 2022. On Annual Taxable Income... Up to $10,275 From $10,275 to $41,775 From $41,775 to $89,075 From $89,075 to $170,050 From $170,050 to $215,950 From $215,950 to $539,900 Over $539,900 The Tax Rate Is... (Percent) 10.0 Hubert calculates that he owes 12.0 22.0 24.0 32.0 35.0 37.0 Based on the IRS table, Hubert calculates that his marginal tax rate is in income taxes for 2022. Hubert then calculates that his average tax rate is when his annual taxable income is $205,000. ▼ , based on the annual income level and the amount of taxes he owes for 2022. After figuring out what he owes in taxes in 2022, Hubert decides to ask an accountant for tax advice. The accountant claims that he has found a legal way to shelter $4,000 of taxable income from the federal government. The maximum amount that Hubert is willing to pay to learn this strategy and reduce his taxable income by $4,000 is (Hint: Sheltering some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income and shelters $10,000 pays income tax on only $40,000.)
Chapter10: Deductions And Losses: Certain Itemized Deductions
Section: Chapter Questions
Problem 30P
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Transcribed Image Text:2. Taxes paid for a given income level
Suppose that Hubert is preparing to file his taxes. He is single and currently lives in Chicago. Hubert earned $205,000 in taxable income in 2022. He
reviews the following table, which shows the IRS tax rates for a single taxpayer in 2022.
On Annual Taxable Income...
Up to $10,275
From $10,275 to $41,775
From $41,775 to $89,075
From $89,075 to $170,050
From $170,050 to $215,950
From $215,950 to $539,900
Over $539,900
The Tax Rate Is...
(Percent)
10.0
Hubert calculates that he owes
12.0
22.0
24.0
32.0
35.0
37.0
Based on the IRS table, Hubert calculates that his marginal tax rate is
in income taxes for 2022.
Hubert then calculates that his average tax rate is
when his annual taxable income is $205,000.
, based on the annual income level and the amount of taxes he owes for 2022.
After figuring out what he owes in taxes in 2022, Hubert decides to ask an accountant for tax advice. The accountant claims that he has found a legal
way to shelter $4,000 of taxable income from the federal government.
The maximum amount that Hubert is willing to pay to learn this strategy and reduce his taxable income by $4,000 is
(Hint: Sheltering
some income means finding a legal way to avoid being charged income tax on that income. For example, someone who has $50,000 in taxable income
and shelters $10,000 pays income tax on only $40,000.)
.
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