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Graduated State Income Tax pp. 122-123
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 2 of 16
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graduated income tax (p. 122)
An income tax in which the tax rate increases at different levels of income.
Key Words to Know
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 3 of 16
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Tax Withheld per Pay Period = Annual Tax Withheld Number of Pay Periods per Year
Formula
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 4 of 16
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San Mateo’s annual salary is $34,500. She is paid semi-monthly. Her personal exemptions total $1,500.
How much does her employer deduct from each of Mateo’s semi-monthly paychecks for state income tax?
Example 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 5 of 16
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Figure 2.2
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 6 of 16
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Find the taxable wages.
Annual Gross Pay – Personal Exemptions
$34,500.00 – $1,500.00 = $33,000.00
Example 1 Answer: Step 1
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 7 of 16
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Find the annual tax withheld.
1. First $1,000: 1.5% of $ 1,000.00 = $ 15.00
2. Next $2,000: 3.0% of $ 2,000.00 = 60.00
3. Next $2,000: 4.5% of $ 2,000.00 = 90.00
4. Over $5,000: 5.0% of ($33,000.00 – $5,000.00)
5.0% of $28,000.00 = 1,400.00
Total $1,565.00
Example 1 Answer: Step 2
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 8 of 16
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Find the tax withheld per pay period.Annual Tax Withheld ÷ Number of Pay Periods per Year
$1,565.00 ÷ 24 = $65.208 or $65.21
Example 1 Answer: Step 3
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Copyright © Glencoe/McGraw-Hill MBA, Section 2-3, Slide 9 of 16
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Graduated State Income Tax2-3END OF SECTIONEND OF SECTION
HomeworkPg. 123: 1-13
