PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 3, Problem 7FPE
Summary Introduction
To discuss: The explanation and calculation the differences resulting from $1,000 tax credit with tax deduction of $1,000.
Tax credit is a sort of tax incentive that can lessen the measure of cash a taxpayer owes the government. In contrast to a tax deduction, which decreases the taxable income, a taxpayer can deduct a tax credit from the measure of taxes they owe, bringing down their tax liability gradually.
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From the following list of tax credits, which credits help to reduce the tax liability on a
taxpayer's taxable income?
1. Personal tax credit
2. Earned income credit
3. Child savers credit
4. Student loan interest credit
1, 2, and 3.
2 and 3.
2, 3, and 4.
1, 2, 3, and 4.
Explain and calculate the differences resulting from a $2,000 tax credit versus a $2,000 tax deduction for a single taxpayer with $40,000 of pre-tax income. The standard deduction in 2018 was $12,000 for single. Note that personal exemptions were suspended for 2018. Use Exhibit 3.3 to determine the corresponding tax rate. Round the answers to the nearest cent.
After-tax Income (Tax Deduction)
$
After-tax Income (Tax Credit)
. Explain and calculate the differences resulting from a $1,000 tax credit versus a $1,000 tax deduction for a
single taxpayer with $40,000 of pre-tax income that takes a standard deduction of $12,000. Be sure to show
your work.
Taxable income is: Taxable Income Not Over:
$9,700
$39,475
$84,200
$160,275
$0
$9,701
$39,476
$84,201
Tax Due Is:
10% of the taxable income
$1,940 plus 12% of the excess over $19,400
$9,086 Plus 22% of the excess over $78,950
$28,765 plus 24% of the excess over $168,400
Chapter 3 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
Ch. 3 - Discuss the basic principles of income taxes and...Ch. 3 - Prob. 2LOCh. 3 - Prob. 3LOCh. 3 - Explain who needs to pay estimated taxes, when to...Ch. 3 - Know where to get help with your taxes and how...Ch. 3 - Implement an effective tax planning strategy.Ch. 3 - Calculating marginal tax rates. Piper Wells is...Ch. 3 - ESTIMATING TAXABLE INCOME, TAX LIABILITY, AND...Ch. 3 - Prob. 3FPECh. 3 - Prob. 4FPE
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