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Question
curtis just received a raise at work increasing his salary by $8,500. he knows that an increase in salary will increase the amount of federal income taxes withheld from his paycheck. which of the following statements best describes the effect his raise will have on state income tax withholdings?
a. state income tax is unrelated to federal, he will see no change in his state withholding.
b. since he is having more withheld for federal, he will have less withheld for state so that he pays the same amount in the end.
c. state income tax is usually a set percentage of federal income tax. with an increase in federal he will see an increase in state withholding.
d. since he is making more money, the state government will take advantage of his raise and charge him more income tax. his state withholding will increase.
please select the best answer from the choices provided
○ a
○ b
- Option A: State and federal income taxes are related in many cases, so this is incorrect.
- Option B: Federal and state withholdings are not inversely related to keep total tax same; higher income means higher tax liability overall, so this is wrong.
- Option C: Many states calculate state income tax as a percentage of federal taxable income or federal tax, so if federal tax (due to raise) increases, state withholding (based on that percentage) would also increase. This is a common tax structure.
- Option D: The state doesn't "take advantage" in a negative sense; it's based on tax brackets/percentages for income, but the reasoning in C is more accurate about the relationship between federal and state tax calculation.
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C. State income tax is usually a set percentage of federal income tax. With an increase in federal he will see an increase in state withholding.