Determine the smallest taxable income on which: A) the very last dollar is taxed

Question

Determine the smallest taxable income on which:

A) the very last dollar is taxed at 25% or more.

Smallest Taxable Income: Correct Answ = 50001

B) the effective tax rate is 20% or more.

Smallest Taxable Income: $ = ?

C) the effective tax rate is 25% or more.

Smallest Taxable Income: = ?

Taxable Income (TI) Tax Rate (f) Income Tax (T) 0 < TI 50,000 .15 .15 (TI) 50,000 < TI 75,000 .25 7500 + 0.25 (TI - 50,000) 75,000 < TI 100,000 .34 13,750 + 0.34 (TI - 75,000) 100,000 < TI 335,000 .039(.34 +.05) 22,250 + 0.39 (TI - 100,000) 335,000 < TI 10,000,000 .34 113,900 + 0.34(TI - 335,000) 10,000,000 < TI 15,000,000 .35 3,400,000 + 0.35 (TI - 10,000,000) 15,000,000 < TI 18,333,333 .38(0.35+0.03) 5,150,000 + 0.38 (TI - 15,000,000) 18,333,333 < TI .35 .35 (TI)

Explanation / Answer

)Use solver function in excel . Let "x" be taxable amount that is over and above the 50,000 and it is below 75,000

then 50,000 is taxed at 15% and it is 7500 and next 25000 at 25% and it is 6250 and next
(25000-x) is taxed at 34% and it is (25000-x)*34%

Total effective tax is 20%
20%=((7500+6250+(25000-x)*34%)/(75000+x)
solving for x gives $13,425.93
Smallest taxable income is 50,000+25000+13425.93=$88426,93

c) same as above instead os 20% make it 25% and it is $80,032

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