Question

question 9 of 10
job a pays an annual salary of $42,100, while job b pays $44,400. the taxpayer choosing between the two jobs files his federal income tax return with a standard deduction of $5700, only himself as an exemption for $3650, and no additional adjustments to income. after taxes, what is the difference in pay between the two jobs? use the table below as a guide.
table for single tax brackets: taxable income is over $0 but not over $8,350: tax $0.00 plus 10% of amount over $0; over $8,350 but not over $33,950: $835.00 plus 15% of amount over $8,350; over $33,950 but not over $82,250: $4,675.00 plus 25% of amount over $33,950; etc.
a. $345
b. $1845

Explanation:

Step1: Calculate taxable income for Job A

First, find the total deductions for Job A. The standard deduction is $\$5700$ and the exemption is $\$3650$, so total deductions are $5700 + 3650=\$9350$. The annual salary for Job A is $\$42100$, so the taxable income for Job A is $42100 - 9350=\$32750$.

Step2: Calculate tax for Job A

Now, use the tax table. For taxable income between $8350$ and $33950$, the tax is $\$835.00$ plus $15\%$ of the amount over $8350$. The amount over $8350$ for Job A is $32750 - 8350=\$24400$. So the tax for Job A is $835 + 0.15\times24400$. Calculate $0.15\times24400 = 3660$, then add $835$: $835+3660=\$4495$.

Step3: Calculate after - tax income for Job A

The after - tax income for Job A is the salary minus tax: $42100 - 4495=\$37605$.

Step4: Calculate taxable income for Job B

The annual salary for Job B is $\$44400$. The total deductions are still $9350$ (since the deductions are the same for the taxpayer). So the taxable income for Job B is $44400 - 9350=\$35050$.

Step5: Calculate tax for Job B

For taxable income between $8350$ and $33950$, the tax is $\$835.00$ plus $15\%$ of the amount over $8350$. The amount over $8350$ for Job B is $35050 - 8350=\$26700$. So the tax for Job B is $835+0.15\times26700$. Calculate $0.15\times26700 = 4005$, then add $835$: $835 + 4005=\$4840$.

Step6: Calculate after - tax income for Job B

The after - tax income for Job B is $44400 - 4840=\$39540$.

Step7: Calculate the difference in after - tax income

The difference between the after - tax income of Job B and Job A is $39540 - 37605=\$1935$? Wait, no, wait. Wait, maybe I made a mistake in the tax calculation. Wait, let's re - calculate the tax for Job B. Wait, the taxable income for Job B is $44400-(5700 + 3650)=44400 - 9350 = 35050$. Wait, the tax bracket: for taxable income from $8350$ to $33950$, the tax is $835+0.15\times(35050 - 8350)$. Wait, $35050-8350 = 26700$. But $33950 - 8350=25600$. Wait, I see my mistake. The tax table has different brackets. Wait, the first bracket: $0 - 8350$: $0 + 10\%$ of over $0$. Second bracket: $8350 - 33950$: $835+15\%$ of over $8350$. Third bracket: $33950 - 82250$: $4675+25\%$ of over $33950$.

Ah! Here is the mistake. For Job A: taxable income is $32750$, which is in the second bracket ($8350 - 33950$). For Job B: taxable income is $35050$, which is in the third bracket? Wait, no, $33950$ is the upper limit of the second bracket. Wait, $35050>33950$, so it is in the third bracket.

Let's recalculate tax for Job A:

Taxable income for Job A: $42100-(5700 + 3650)=42100 - 9350 = 32750$. Since $8350<32750<33950$, tax is $835+0.15\times(32750 - 8350)$. $32750 - 8350 = 24400$. $0.15\times24400 = 3660$. Tax for Job A: $835 + 3660=4495$. Correct.

Taxable income for Job B: $44400 - 9350 = 35050$. Since $33950<35050<82250$, tax is $4675+0.25\times(35050 - 33950)$. $35050 - 33950 = 1100$. $0.25\times1100 = 275$. Tax for Job B: $4675+275 = 4950$.

Now, after - tax income for Job A: $42100 - 4495 = 37605$.

After - tax income for Job B: $44400 - 4950 = 39450$.

Difference: $39450 - 37605 = 1845$.

So the difference in pay between the two jobs after taxes is $\$1845$.

Answer:

$1845$