© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin 9-1 Chapter 9 Taxes STARTEXIT

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© The McGraw-Hill Companies, Inc., 2008McGraw-Hill/Irwin

Chapter 9

Taxes

START EXIT

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Chapter Outline

9.1Sales Taxes

9.2 Income and Payroll Taxes

9.3 Property Taxes

9.4 Other Taxes

Chapter Summary

Chapter Exercises

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9.1 Sales Taxes

• Sales taxes are taxes imposed by state and/or local governments on retail sales.

• As of May 2007, state sales taxes are in place in 45 states, plus the District of Columbia

• Only Alaska, Delaware, Montana, New Hampshire, and Oregon do not impose state sales taxes.

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9.1 Sales Taxes

Example 9.1.1• Problem

– If the state sales tax rate is 4.5% and the local sales tax rate is 3.75%, what is the overall sales tax rate?

• Solution4.5% + 3.75% = 8.25%

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9.1 Sales Taxes


– A sweater costs $42.95 and the sales tax rate is 7 3/8%. Calculate (a) the amount of sales tax and (b) the total price including tax.

• Solution

$42.95 x 7 3/8% = $3.18

$42.95 + $3.18 = $46.13

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9.1 Sales Taxes

FORMULA 9.1.1Sales Tax Formula

T = P(1 + r)

where T represents the TOTAL PRICE INCLUDING

TAXP represents the PRICE BEFORE TAX

r represents the SALES TAX RATE

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9.1 Sales Taxes


– Repeat Example 9.1.2, using Formula 9.1.1.

• SolutionT = P(1 + r)T = $42.95(1 + 0.07375)T = $46.13$46.13 -- $42.95 = $3.18

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9.1 Sales Taxes


– On a trip to his favorite local discount store, Jack bought a DVD player costing $79.95, a toaster for $29.95, and a case of cranberry juice for $12.75. The sales tax rate on all purchases is 6 ¼%. Find the total cost of his purchases including tax.

• SolutionT = P(1 + r)T = ($79.95 + $29.95 + $12.75)(1 + 6 ¼%)T = $130.32

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9.1 Sales Taxes


– Ardana is shopping for a new car. She figures she can afford a $325 monthly payment. On the basis of this payment and the rates she can get on a car loan from her credit union, she has determined she can afford to pay $21,900 for a new car.

– Unfortunately, she forgot that in the county where she lives the sales tax rate is 8.75%. What price for the car can she really afford? How much sales tax would she then pay?

• SolutionT = P(1 + r)$21,900 = P(1 + 8.75%)P = $20,137.93Sales Tax = $21,900 -- $20,137.93 = $1,762.07.

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9.1 Sales Taxes


– A souvenir shop sets all of its prices to include 6.75% sales tax. For the month of June, sales totaled $16,739. How much sales tax is due on these sales?

• SolutionT = P(1 + r)$16,739 = P(1 + 6.75%)P = $15,343.33

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Section 9.1 Exercises

Problem 1:

Calculating Sales Tax

Problem 2:

Finding a Price before Tax

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Problem 1

• A dishwasher costs $289.99 and the sales tax rate is 7.5%. Calculate the amount of sales tax and the total price.

CHECK YOUR ANSWER

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Solution 1

• A dishwasher costs $289.99 and the sales tax rate is 7.5%. Calculate the amount of sales tax and the total price.

• T = P(1 + r)

T = $289.99(1 + 7.5%)

T = $311.74

Sales Tax = $311.74 -- $289.99 = $21.75

BACK TO GAME BOARD

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Problem 2

• You stopped by the grocery store without realizing that you only had $50 in your wallet. How much money can you spend and still have enough to pay the sales tax of 6%?

CHECK YOUR ANSWER

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Solution 2• You stopped by the grocery store without

realizing that you only had $50 in your wallet. How much money can you spend and still have enough to pay the sales tax of 6%?

• T = P(1 + r)$50 = P(1 + 6%)$50 = P(1.06)P = $47.17

BACK TO GAME BOARD

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• The 16th Amendment to the U.S. Constitution, ratified in 1913, provides that “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived…” The federal income tax has become an enormous source of revenue to the federal government.

• Most states have some sort of personal income tax as well (as of May 2007, there is no state income tax in Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming).

• Corporate income taxes differ from personal income taxes and also vary by jurisdiction.

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• The first step to calculating the amount of income tax to be paid is to determine just how much income is subject to tax. This portion of income is known as taxable income.

• Tax exemptions and deductions are subtracted from income before the tax is calculated. Taxpayers are generally allowed to exempt a certain amount of income for themselves and for each person they can claim as a dependent.

• In addition, many expenses are tax deductible, meaning that they can be subtracted from income before it’s taxed (e.g. educational expenses, charitable contributions, etc.).

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• In 2006, taxpayers were allowed to exempt $3,300 for themselves and for each person they could claim as a dependent.

• Taxpayers with significant tax deductible expenses file a form with their tax returns where they itemize these deductions, listing the expenses of each type so that they can be deducted.

• Taxpayers who choose not to itemize may usually take a standard deduction instead. The standard deduction amount in 2006 was $5,150 for a single taxpayer and $10,300 for a married couple filing jointly.

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– Luisa and Alfonso are a married couple who had a joint income of $68,579 in 2006. They have two dependent children. They paid $3,450 in state and local taxes in 2006 and gave $3,700 to charity. What was their taxable income in 2006 if the tax exemption is $3,300 and the standard deduction for a married couple filing their taxes jointly is $10,300?

• Solution– Luisa and Alfonso can claim four exemptions, two for themselves

and two for their dependent children.– Total Exemptions = 4 x $3,300 = $13,200– Total Deductions = $3,450 + $3,700 = $7,150

• However, the standard deduction of $10,300 is greater so they are better off without itemizing.

– Total Taxable Income = $68,579 -- $13,200 -- $10,300 = $45,079

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2006 INCOME TAX RATES – MARRIED FILING JOINTLY OR QUALIFYING WIDOWER

If Taxable Income is Over But not Over The Tax is:

$0 $15,100 10% of the amount over $0

$15,100 $61,300 $1,510 plus 15% of the amount over $15,100




$336,550 No limit $91,043 plus 35% of the amount over $336,550

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– Calculate the 2006 federal income tax for Luisa and Alfonso.

• Solution– Their taxable income is $45,079.– Since this is more than $15,100 but less than $61,300,

according to the 2006 income tax rates table their taxes should be $1,510 plus 15% of the amount over $15,100.

$45,079 -- $15,100 = $29,979$29,979 x 15% = $4,496.85Total Tax = $4,496.85 + $1,510 = $6,006.85

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• While income taxes are calculated and owed on the basis of the taxpayer’s annual income, the government is not content to sit around and wait until the end of the year to collect the tax owed.

• The income tax you owe for your income must be paid when you earn it. To make sure that happens, employers are responsible for withholding money for taxes from their employees’ paychecks and forwarding this money to the Internal Revenue Service (for federal taxes) and state tax agencies.

• An employer is responsible for withholding taxes on the basis of withholding rates published by the IRS.

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MARRIED PERSON

If the amount of wages (after subtracting withholding allowances) is:

The amount of income tax to withhold is:

Over But not Over of Excess Over

$0 $308 $0 $308

$308 $881 10% $881

$881 $2,617 $57.30 plus 15% $2,617

$2,617 $4,881 $317.70 plus 25% $4,881

$4,881 $7,517 $883.70 plus 28% $7,517

$7,517 $13,213 $1,621.78 plus 33% $13,213

$13,213 $3,501.46 plus 35%

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– Erik is paid biweekly. He is married and claims three exemptions on his tax return. After he takes out his contributions for health insurance coverage and his 401(k), his gross taxable pay is $1,535.06. How much should his employer withhold for federal income taxes.

• Solution– Each exemption is worth $126.92 so his total exemptions

amount to $126.92 x 3 = $380.76.– Subtracting that amount from his income comes to $1,535.06 --

$380.76 = $1,154.30.– For this amount, according to the table, Erik’s employer should

withhold $57.30 plus 15% of the excess over $881, so the withholding is $57.30 + 15%($1,154.30 -- $881) = $98.30

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• Income tax withholding is not the only tax collection for which an employer is responsible. The taxes that fund the U.S. Social Security system and Medicare are also collected by withholding from an employee’s paycheck.

• The law that requires these payments is known as the Federal Insurance Contributions Act, and hence these taxes are commonly referred to by the acronym FICA.

• For 2006, the Social Security portion of the FICA tax was 6.2% up to $94,200 of gross wages.

• This percent is paid by both the employee and the employer, so in actuality this totals 12.4%.

• The Medicare portion of FICA was 1.45%, also paid by both employee and employer, though without any upper limit.

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– Suppose that Lesley earns a gross salary of $43,500 per year and is paid biweekly. She pays $150 with each paycheck for deductions for health insurance and other benefits. How much will be deducted from her biweekly paycheck for FICA?

• Solution– Lesley’s gross biweekly pay is $43,500/26 = $1,673.08– Subtracting her deductions leaves $1,673.08 -- $150 = $1,523.08– The Social Security tax will be 6.2% x $1,523.08 = $93.43– The Medicare tax will be 1.45% x $1,523.08 = $22.08– FICA taxes = $93.43 + $22.08 = $115.51

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– Ramon earned a gross annual salary of $148,900. Calculate his total annual FICA taxes.

• Solution– The Social Security tax applies only to the first $94,200

of income, so Ramon will pay $94,200 x 6.2% = $5,840.40.

– The Medicare tax will be $148,900 x 1.45% = $2,159.05– FICA Taxes = $5,840.40 + $2,159.05 = $7,999.45

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Problem 1:

Calculating Taxable Income

Problem 2:

Calculating Income Taxes

Problem 3:

Calculating Tax Withholding

Problem 4:

Calculating FICA Taxes

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Problem 1

• Vanessa and Michael are a married couple who had a joint income of $134,297 in 2006. They have one dependent child. They paid $7,100 in state and local taxes and contributed $10,000 to charity. What is their taxable income for 2006?

CHECK YOUR ANSWER

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Solution 1• Vanessa and Michael are a married couple who had

a joint income of $134,297 in 2006. They have one dependent child. They paid $7,100 in state and local taxes and contributed $10,000 to charity. What is their taxable income for 2006?

• Exemptions = 3 x $3,300 = $9,900• Deductions = $7,100 + $10,000 = $17,100• Taxable Income = $134,297 -- $9,900 -- $17,100 = $107,297

BACK TO GAME BOARD

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Problem 2

• Calculate the 2006 income tax for Vanessa and Michael. They had a taxable income of $107,297.

CHECK YOUR ANSWER

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Solution 2• Calculate the 2006 income tax for Vanessa and

Michael. They had a taxable income of $107,297.

• $8,440 plus 25% of the amount over $61,300• $107,297 -- $61,300 = $45,997• $45,997 x 25% = $11,499.25• Total Tax = $8,440 + $11,499.25 = $19,939.25

BACK TO GAME BOARD

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Problem 3

• Michael, who is married, is paid weekly and claims two exemptions, for himself and his child, because his wife, Vanessa, is claiming her own exemption.

• After various benefits are taken out of his paycheck, his gross annual pay is $77,286. How much should his employer withhold for federal income taxes?

CHECK YOUR ANSWER

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Solution 3• Michael is married, paid biweekly, and claims two exemptions, for

himself and his child, because Vanessa is claiming her own exemption.

• After various benefits are taken out of his paycheck, his gross annual pay is $77,286. How much should his employer withhold for federal income taxes?

• Biweekly Pay = $77,286/26 = $2,972.54• Exemptions = 2 x $126.92 = $253.84• Taxable Income = $2,972.54 -- $253.84 = $2,718.70• $317.70 plus 25% of excess over $2,617• $2,718.70 -- $2,617 = $101.70• $101.70 x 25% = $25.42• Total Tax = $317.70 + $25.42 = $343.12

BACK TO GAME BOARD

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Problem 4

• Michael’s biweekly pay is $2,972.54. Calculate his FICA taxes.

CHECK YOUR ANSWER

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Solution 4• Michael’s biweekly pay is $2,972.54. Calculate

his FICA taxes.

Social Security = $2,972.54 x 6.2% = $184.30• Medicare = $2,972.54 x 1.45% = $43.10• FICA Taxes = $184.30 + $43.10 = $227.40

BACK TO GAME BOARD

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9.3 Property Taxes

• Property taxes are, as name suggests, taxes that must be paid on certain types of property.

• Real estate taxes is a most widespread and financially significant form of property taxes.

• The amount of tax owed on a given property is determined by applying a tax rate to the property’s assessed value.

• Even though the assessed value may differ dramatically from market value, we would expect that different properties in the same jurisdiction would be assessed at roughly the same percent of their market value. This percentage is referred to as the uniform assessment percent.

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9.3 Property Taxes


– Josh’s house, assessed at $75,372, has a fair market value of around $250,000. Find the uniform assessment percent based on Josh’s assessment and use it to approximate the assessed value of a house worth $350,000 in this same tax jurisdiction.

• Solution– $75,372/$250,000 = 30.15% of market value– $350,000 x 30.15% = $105,525 assessed value

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9.3 Property Taxes


– Suppose that the uniform assessment rate is supposed to be 25% in Boltonboro township. What market value does a $53,502 assessment suggest?

• Solution25% x Market Value = $53,502Market Value = $214,008

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9.3 Property Taxes

• The tax rate may be expressed in a number of different equivalent ways.

• It may be expressed as a rate per thousand.• Mills are an equivalent way of expressing a rate

per thousand. A mill is 1/1,100 of a dollar.• A tax rate may be expressed as a rate per

hundred.

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9.3 Property Taxes

If the Tax Rate is Expressed as: Calculate the Property Tax by:

Rate per thousand•Divide assessed value by 1,000

•Multiply by the rate per thousand

Mills

•Treat mills the same as a rate per

thousand

•Divide assessed value by 1,000

•Multiply by the rate per thousand

Percent•Multiply the percent by the

assessed value

Rate per hundred

•Treat the rate per hundred as a

percent

•Multiply the percent by the

assessed value

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9.3 Property Taxes


– Josh’s house has an assessed value of $75,372. He pays real taxes to his county, town, and school district. The county rate is 14 mills, the town rate is $8.57 per thousand, and the school district rate is $1.35 per hundred. How much does he pay to each of these, and how much does he pay in total?

• Solution$75,372/1,000 = 75.372County Tax = 75.372 x 14 = $1,055.21Town Tax = 75.372 x $8.57 = $645.94School Tax = 1.35% x $75,372 = $1,017.52Total Taxes = $1,055.21 + $645.94 + $1,017.52 = $2,718.67

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9.3 Property Taxes

If the Rate is Expressed as:Divide the Total Levy by the Assessed Value and:

Rate per thousand Multiply the result by $1,000

Mills Multiply the result by 1,000

PercentMove the decimal two places to the left

Rate per hundredRewrite the percent rate as a dollar amount

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9.3 Property Taxes


– The Bloome County legislature has set the overall property tax levy for 2008 to be $39,600,000. The total assessed value of taxable property in the county is $4,873,595,000. Determine the 2008 real estate tax rate for the county. Express the result as (a) percent, (b) a rate per hundred, (c) a rate per thousand, and (d) mills.

• Solution

Rate = $39,600,000/$4,873,595,000 = 0.0081254354

(a) 0.8125%

(b) $0.813 per hundred

(c) 0.0081254 x 1,000 = $8.13 per thousand

(d) 8.13 mills

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9.3 Property Taxes


– Suppose that the county sets the tax rate to be $8.13 per thousand. How much will the actual taxes total?

• Solution

4,873,595 thousands x $8.13 per thousand = $39,622,327.35

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Problem 1:

Calculating Real Estate Taxes

Problem 2:

Setting Tax Rates

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Problem 1

• Randy’s house has an assessed value of $94,230. The tax rate is $10.34 per thousand. What is the amount of his property tax?

CHECK YOUR ANSWER

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Solution 1• Randy’s house has an assessed value of $94,230.

The tax rate is $10.34 per thousand. What is the amount of his property tax?

• $94,230/1,000 = 94.23

94.23 x $10.34 = $974.34

BACK TO GAME BOARD

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Problem 2

• The Decatur County legislature has set the overall property tax levy for 2008 to be $63,000,000. The total assessed value of taxable property is $8,425,194,000. Determine the 2008 real estate tax rate for the county and express it in mills.

CHECK YOUR ANSWER

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Solution 2• The Decatur County legislature has set the

overall property tax levy for 2008 to be $63,000,000. The total assessed value of taxable property is $8,425,194,000. Determine the 2008 real estate tax rate for the county and express it in mills.

• Rate = $63,000,000/$8,425,194,000 = 0.0074775• 0.0074775 x 1,000 = 7.48 mills

BACK TO GAME BOARD

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9.4 Other Taxes

• Excise taxes are taxes levied on specific products or services.

• A quick glance at the breakout of charges on your telephone bill will probably provide several examples of excise taxes.

• Another example would be a tax on airplane tickets to pay for airport security or a tax on gasoline to pay for road maintenance.

• They may be charged to discourage the purchase of certain products, such as cigarettes, alcohol, and firearms.

• Luxury taxes are extra sales taxes on the sale of luxury items such as expensive sports cars, yachts, furs, jewelry, etc.

• Actually, some taxes on home telephone service were originally considered luxury taxes because having a telephone at home used to be a luxury.

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9.4 Other Taxes


– For the New York gasoline tax of 4% up to $0.08 per gallon, what would the tax be on a gallon of gas if the price is (a) $1.79 per gallon, (b) $2.00 per gallon, or (c) $3.75 per gallon?

• Solution

(a) 4% x $1.79 = $0.0716 = 7 cents per gallon

(b) 4% x $2.00 = $0.08 = 8 cents per gallon

(c) 4% x $3.75 = $0.15 = 15 cents per gallon;

however, the maximum is 8 cents per gallon, so

the actual tax is 8 cents per gallon

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9.4 Other Taxes

• Items imported into the United States from overseas may be subject to duties, import fees, or tariffs.

• Customs and duties can be of significance for individuals when traveling. Items that you buy overseas may be subject to duties when you bring them back to the United States.

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9.4 Other Taxes


– Suppose that imports of wine are subject to an import duty of $8.00 per case. A case of wine is defined to be 9 liters. How much import duty would have to be paid on a shipment of 100 bottles, each of which contains 1.5 liters.

• Solution– The total amount imported is 100 x 1.5 = 150 liters– Since there are 9 liters per case, this is 150/9 = 16.6667

cases– The duty would be $8.00 x 16.6667 = $133.33

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9.4 Other Taxes

• When someone dies, their property passes on to the survivors as specified in the will or ruled by the probate court if there is no will.

• This property is referred to as the deceased person’s estate and estate taxes may be assessed against the value of the property in the estate.

• Estate taxes apply only to a person’s taxable estate which is, generally speaking, the fair market value of the deceased person’s property, after subtracting the following:– The amount required to repay any debts– Funeral expenses– Gifts specified in the will for charities– Amounts left to a surviving spouse– Fees paid to the person selected to administer the estate and for

legal expenses of administering the estate.

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9.4 Other Taxes


– Suppose that Anselm died, leaving assets worth $925,063. His will left $400,000 to his wife, $75,000 to his church, and $35,000 to other charities. At his death, he had debts totaling $54,053 and his funeral expenses were $22,500. The executor’s and other legal fees amounted to $30,000. What was his taxable estate?

• Solution– The money left to his wife, charities, and expenses are

not taxable and come up to a total of $616,553.– The remaining taxable estate is $925,063 -- $616,553 =

$308,510

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9.4 Other Taxes

Year of Death Exemption Rate

2003 $1,000,000 49%

2004 $1,500,000 48%

2005 $1,500,000 47%

2006 $2,000,000 46%

2007 $2,000,000 45%

2008 $2,000,000 45%

2009 $3,500,000 45%

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9.4 Other Taxes


– If Anselm died in 2006, how much federal estate tax would have been owed on his estate?

• Solution– None, because Anselm’s taxable estate of $308,510 fell

far below the exemption.

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Problem 1:

Excise Taxes

Problem 2:

Estate Taxes

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Problem 1

• Your state is charging a 2% excise tax on luxury cars over $35,000. If you are purchasing a car for $38,000, what would be the excise tax?

CHECK YOUR ANSWER

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Solution 1• Your state is charging a 2% excise tax on luxury

cars over $35,000. If you are purchasing a car for $38,000, what would be the excise tax?

• $38,000 x 2% = $760.00

BACK TO GAME BOARD

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Problem 2

• Philip’s grandmother died in 2006 and her taxable estate was worth $1,239,500. How much federal estate tax would be paid on this estate?

CHECK YOUR ANSWER

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Solution 2• Philip’s grandmother died in 2003 and her taxable

estate was worth $1,239,500. How much federal estate tax would be paid on this estate?

• The exemption for 2003 is $1,000,000 (see table on p. 409), so federal estate tax would be paid only on $1,239,500 -- $1,000,000 = $239,500

• $239,500 x 49% = $117,355

BACK TO GAME BOARD

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Chapter 9 Summary

• Calculating Sales Tax• Finding a Price before Tax• Calculating Taxable Income• Calculating Total Tax• Calculating Tax Withholding• Calculating FICA Taxes• Assessed Value• Setting Property Tax Rates• Excise Taxes• Estate Taxes

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Chapter 9 Exercises

Section 9.1 Section 9.2 Section 9.3 Section 9.4

$100 $100 $100 $100

$200 $200 $200 $200

EXIT

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Section 9.1 -- $100

• A bicycle costs $107.95 and the sales tax rate is 6.5%. Calculate the total price including tax.

CHECK YOUR ANSWER

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Section 9.1 -- $100

• A bicycle costs $107.95 and the sales tax rate is 6.5%. Calculate the total price including tax.

• T = P(1 + r)• T = $107.95(1 + 6.5%)• T = $114.97

BACK TO GAME BOARD

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Section 9.1 -- $200

• Ayisha purchased a new computer for the total price, including tax, of $2,439.12. What was the price of this item before tax?

CHECK YOUR ANSWER

9-69

Section 9.1 -- $200

• Ayisha purchased a new computer for the total price, including tax, of $2,439.12. What was the price of this item before tax if the tax rate is 7.5%?

• T = P(1 + r)• $2,439.12 = P(1 + 7.5%)• $2,439.12 = P(1.075)• P = $2,268.95

BACK TO GAME BOARD

9-70

Section 9.2 -- $100

• Mary and Arnold are a married couple who had a joint income of $67,823 in 2006. They paid $3,391.15 in state taxes and contributed $3,000 to charity in 2006. What was their taxable income for 2006?

CHECK YOUR ANSWER

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Section 9.2 -- $100

• Mary and Arnold are a married couple who had a joint income of $67,823 in 2006. They paid $3,391.15 in state taxes and contributed $3,000 to charity in 2006. What was their taxable income for 2006?

• Mary and Arnold could claim two exemptions, at $3,300 each for a total of $3,300 x 2 = $6,600.

• Also, they could deduct state taxes and charitable contributions, for a total of $3,391.15 + $3,000 = $6,391.15.

• However, the standard deduction for married couples is $10,300, so they are better off taking the standard deduction instead of itemizing.

• Taxable Income = $67,823 -- $6,600 -- $10,300 = $50,923

BACK TO GAME BOARD

9-72

Section 9.2 -- $200• Mary and Arnold are a married couple who had

a joint income of $67,823 in 2006. They paid $3,391.15 in state taxes and contributed $3,000 to charity in 2006. What was their taxable income for 2006?

• As determined in a previous problem, their taxable income is $50,923.

• Calculate the 2006 federal income tax for this couple.

CHECK YOUR ANSWER

9-73

Section 9.2 -- $200• Mary and Arnold are a married couple who had a joint

income of $67,823 in 2006. They paid $3,391.15 in state taxes and contributed $3,000 to charity in 2006. What was their taxable income for 2006?

• As determined in a previous problem, their taxable income is $50,923. Calculate the 2006 federal income tax for this couple.

• Using the table on page 387, we determine that Mary and Arnold fall into Over $15,100 But not Over $61,300 tax bracket.

• Therefore, they paid $1,510 plus 15% of the amount over $15,100• $50,923 -- $15,100 = $35,823• $35,823 x 15% = $5,373.45• Total Tax = $5,373.45 + $1,510 = $6,883.45

BACK TO GAME BOARD

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Section 9.3 -- $100• Luann’s house, assessed at $423,956, has a fair

market value of around $600,000. Find the uniform assessment percent based on Luann’s assessment.

CHECK YOUR ANSWER

9-75

Section 9.3 -- $100

• Luann’s house, assessed at $423,956, has a fair market value of around $600,000. Find the uniform assessment percent based on Luann’s assessment.

• $423,956/$600,000 = 70.66% of market value

BACK TO GAME BOARD

9-76

Section 9.3 -- $200

• Luann’s house has an assessed value of $423,956. She pays real taxes to her county, city, and school district. The county rate is 12 mills, the city rate is $9.50 per thousand, and the school district rate is $1.88 per hundred. What are Luann’s total taxes?

CHECK YOUR ANSWER

9-77

Section 9.3 -- $200• Luann’s house has an assessed value of $423,956.

She pays real taxes to her county, city, and school district. The county rate is 12 mills, the city rate is $9.50 per thousand, and the school district rate is $1.88 per hundred. What are Luann’s total taxes?

• County Tax($423,956/1,000) x $12 = $5,087.47

• City Tax($423,956/1,000) x $9.50 = $4,027.58

• School District Tax($423,956/100) x $1.88 = $7,970.37

• Total Tax = $17,085.42

BACK TO GAME BOARD

9-78

Section 9.4 -- $100

• For the Bainbridge gasoline tax of 3% up to $0.10 per gallon, what would the tax be on a gallon of gas if the price before taxes is $3.10?

CHECK YOUR ANSWER

9-79

Section 9.4 -- $100

• For the Bainbridge gasoline tax of 3% up to $0.10 per gallon, what would the tax be on a gallon of gas if the price before taxes is $3.10?

• 3% x $3.10 = $0.093

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9-80

Section 9.4 -- $200

• Suppose that you are returning from a trip to Europe and customs regulations permit you to bring back up to $800 worth of duty-free items. Beyond that exemption, there is an import duty of 5% of the price paid. Your total purchases are $915.00. How much duty must be paid?

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9-81

Section 9.4 -- $200

• Suppose that you are returning from a trip to Europe and customs regulations permit you to bring back up to $800 worth of duty-free items. Beyond that exemption, there is an import duty of 5% of the price paid. Your total purchases are $915.00. How much duty must be paid?

• $915 -- $800 = $115• $115 x 5% = $5.75

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© The McGraw-Hill Companies, Inc., 2008 McGraw-Hill/Irwin 9-1 Chapter 9 Taxes STARTEXIT