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ly.c.christopher
Posts: 5
Posted 20:43 Jan 31, 2014 |

In the schedule for P 5.2 the tax is $800 + .15 for an income of $10,000 for example. Does this mean it is ((10000 * .15) + 800)/8000 when it states "the amount over"?

rabbott
Posts: 1649
Posted 11:59 Feb 01, 2014 |

Read this table as follows.

If your status is Single and if the taxable income is over but not over the tax is of the amount over
$0 $8,000 10% $0
$8,000 $32,000 $800+15% $8,000
$32,000   $4,400+25% $32,000
If your status is Married and if taxable income is over but not over the tax is of amount over
$0 $16,000 10% $0
$16,000 $64,000 $1,600+15% $16,000
$64,000   $8,800+25% $64,000
 

The total tax is the dollar amount listed in the "the tax is" column plus the percentage amount in that column times the difference between the income and the first column.

For example, if income is $10,000, the tax is $800 + 0.15 * ($10,000 - $8,000) = $1,100.

Each row is a tax bracket. The percentage scales the tax amount from an income at the bottom to an income at the top. For example if income is $8,000, according to the first row the tax is 0.1 * $8,000 = $800, which is the same as that prescribed by the second row, which is $800 + 0.15 * ($8,000 - $8,000).

The same is true of the relationships between the other rows. If income is $32,000, the second row puts the tax at $800 + 0.15 * ($32,000 - $8,000) = $800 + 0.15 * ($24,000) = $800 + $3,600 = $4,400. But that's the same amount prescribed by the next row, i.e., $4,400 + 0.25 * ($32,000 - $32,000).

Last edited by rabbott at 12:10 Feb 01, 2014.