In answering this question, refer to the following tax bracket information for 2020.
Tax Rates
Rate Single Married Filing Jointly
10% $0 - $9,875 $0 - $19,750
12% $9,875 - $40,125 $19,750 - $80,250
22% $40,125 - $85,525 $80,250 - $171,050
24% $85,525 - $163,300 $171,050 - $326,600
32% $163,300 - $207,350 $326,600 - $414,700
35% $207,350 - $518,400 $414,700 - $622,050
37% $518,400 or more $622,050 or more
The Millers are a married couple, filing their taxes jointly. In 2020, they had a combined taxable income of $171,050. If one of the Millers had taken the opportunity to work overtime in 2020 to earn an additional $1000, how much additional income tax would they owe?
$240.00
$3,661.00
$29,451.00
$220.00
$29,211.00
To calculate the additional income tax owed by the Millers if one of them earned an additional $1000 in 2020, we need to determine the tax rate applicable to their total taxable income of $172,050.
Based on the tax bracket information provided, we can see that $171,050 falls into the 24% tax bracket for married couples filing jointly. Therefore, the tax owed on the initial $171,050 of income is:
$19,750 at 10% = $1,975
($80,250 - $19,750) at 12% = $7,830
($171,050 - $80,250) at 22% = $18,315
Total tax owed on $171,050 = $1,975 + $7,830 + $18,315 = $28,120
Now, if the Millers earn an additional $1000, their total taxable income becomes $172,050. The additional $1000 falls into the 22% tax bracket as follows:
($172,050 - $171,050) at 22% = $220
Therefore, the additional income tax the Millers would owe if one of them earns an additional $1000 in 2020 is $220.00.