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Lorna has a gross income of €50,000 for the year - Junior Cycle Mathematics - Question 10 - 2018
Question 10
Lorna has a gross income of €50,000 for the year. Using the rates and bands above, work out her total income tax for the year. The amount of income tax is shown for... show full transcript
Worked Solution & Example Answer:Lorna has a gross income of €50,000 for the year - Junior Cycle Mathematics - Question 10 - 2018
Step 1
Complete the income tax calculation for Lorna's gross income of €50,000
Answer
To calculate Lorna's total income tax, we divide her income into tax bands based on the provided rates:
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The first €35,000 is taxed at 20%:
- Tax from the first band:
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The remaining income is taxed at 40%. Lorna's income exceeds €35,000, so:
- Remaining income:
- Tax from the second band:
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Total income tax:
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Total Tax = Tax from first band + Tax from second band
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Total Tax = €7,000 + €6,000 = €13,000
Therefore, Lorna's total income tax for the year is €13,000.
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Step 2
Complete the graph on the next page to show the amount of income tax for gross incomes up to €60,000
Answer
To complete the graph for gross incomes up to €60,000, we calculate various income tax amounts using the definitions provided:
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For €15,000:
- Tax = 0, as it is below the €35,000 threshold.
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For €30,000:
- Tax = 0.2 * 30,000 = €6,000.
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For €35,000:
- Tax = 0.2 * 35,000 = €7,000.
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For €50,000 (already calculated):
- Tax = €13,000.
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For €60,000:
- Remaining income = 60,000 - 35,000 = 25,000
- Tax = 7,000 + 0.4 * 25,000 = €17,000.
Plot these points on the graph accurately, ensuring the graph changes slope at €35,000.
Step 3
Draw a graph to show the amount of income tax taking the tax credit into account
Answer
To adjust for the tax credit of €3,000, we need to recalculate the tax payable for each income level:
- For €15,000, total tax = 0 - 3,000 = €0. (No tax payable)
- For €30,000, total tax = 6,000 - 3,000 = €3,000.
- For €35,000, total tax = 7,000 - 3,000 = €4,000.
- For €50,000, total tax = 13,000 - 3,000 = €10,000.
- For €60,000, total tax = 17,000 - 3,000 = €14,000.
Ensure to plot these adjusted points clearly on the graph, showcasing the effect of the tax credit and ensuring the appropriate slope changes.