{"id":4605,"date":"2023-06-16T02:07:38","date_gmt":"2023-06-16T02:07:38","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/?post_type=chapter&#038;p=4605"},"modified":"2025-08-27T00:35:00","modified_gmt":"2025-08-27T00:35:00","slug":"income-tax-and-paycheck-deductions-apply-it-1","status":"web-only","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/chapter\/income-tax-and-paycheck-deductions-apply-it-1\/","title":{"raw":"Income Tax and Paycheck Deductions: Apply It 1","rendered":"Income Tax and Paycheck Deductions: Apply It 1"},"content":{"raw":"<section class=\"textbox learningGoals\">\r\n<ul>\r\n\t<li>Determine gross income, adjustable gross income, taxable income and calculate federal income tax<\/li>\r\n\t<li>Apply exemptions, deductions, and credits to basic income tax calculations<\/li>\r\n\t<li>Calculate federal income tax<\/li>\r\n\t<li>Determine social security and Medicare taxes<\/li>\r\n<\/ul>\r\n<\/section>\r\n<h2>Taxation Demystified: Navigating Personal Taxes with Stephan<\/h2>\r\n<p>Stephan, a hardworking individual, has to manage his full-time job and freelance work, while also taking care of his expenses and savings. As the tax time approaches, Stephan has decided to make an early start by estimating his taxable income, determining his federal income tax, and assessing his social security and Medicare taxes. Let's help Stephan navigate through this complex process of tax calculations to better understand personal taxation.<\/p>\r\n<center>\r\n[caption id=\"attachment_6829\" align=\"aligncenter\" width=\"333\"]<img class=\"wp-image-6829\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-200x300.jpg\" alt=\"Tax paperwork with a sticky note that says &quot;Need help?&quot;\" width=\"333\" height=\"500\" \/> Figure 1. Help Stephan with his taxes[\/caption]\r\n<\/center>\r\n<p>&nbsp;<\/p>\r\n<p>Stephan has meticulously gathered all his financial documents and organized the information into a neat table (shown below). The table contains information about his earnings and expenditures throughout the year.<\/p>\r\n<table style=\"width: 540px;\" align=\"center\">\r\n<thead>\r\n<tr>\r\n<th style=\"width: 300.302px;\">Category<\/th>\r\n<th style=\"width: 316.031px;\">Dollar Amount<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Full-time job<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$63,782[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Freelance work<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$12,829[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Interest from accounts<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$189[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Tax-deferred retirement<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$3,600[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Mortgage interest<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$895[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Property taxes<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$2,900[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Health savings account<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$2,400[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Child tax credit<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$2,000[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 300.635px;\">Earned income tax credit<\/td>\r\n<td style=\"width: 316.365px;\">[latex]$1,800[\/latex]<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<section class=\"textbox tryIt\">[ohm2_question hide_question_numbers=1]9615[\/ohm2_question]<\/section>\r\n<p>After calculating his taxable income, Stephan, filing as a single person, then proceeds to calculate his federal income tax. He needs to use the tax table given below to calculate the amount of federal income tax he owes based on his estimated taxable income.<\/p>\r\n<table style=\"width: 716px;\" align=\"center\">\r\n<thead>\r\n<tr>\r\n<th style=\"width: 214.167px;\">Tax Rate<\/th>\r\n<th style=\"width: 419.833px;\">For Single Filers<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]10\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$0[\/latex] to [latex]$11,000[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]12\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$11,000[\/latex] to [latex]$44,725[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]22\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$44,725[\/latex] to [latex]$95,375[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]24\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$95,375[\/latex] to [latex]$182,100[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]32\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$182,100[\/latex] to [latex]$231,250[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]35\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$231,250[\/latex] to [latex]$578,125[\/latex]<\/td>\r\n<\/tr>\r\n<tr>\r\n<td style=\"width: 214.5px;\">[latex]37\\%[\/latex]<\/td>\r\n<td style=\"width: 420.167px;\">[latex]$578,125[\/latex] or more<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<section class=\"textbox tryIt\">[ohm2_question hide_question_numbers=1]9616[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\">\n<ul>\n<li>Determine gross income, adjustable gross income, taxable income and calculate federal income tax<\/li>\n<li>Apply exemptions, deductions, and credits to basic income tax calculations<\/li>\n<li>Calculate federal income tax<\/li>\n<li>Determine social security and Medicare taxes<\/li>\n<\/ul>\n<\/section>\n<h2>Taxation Demystified: Navigating Personal Taxes with Stephan<\/h2>\n<p>Stephan, a hardworking individual, has to manage his full-time job and freelance work, while also taking care of his expenses and savings. As the tax time approaches, Stephan has decided to make an early start by estimating his taxable income, determining his federal income tax, and assessing his social security and Medicare taxes. Let&#8217;s help Stephan navigate through this complex process of tax calculations to better understand personal taxation.<\/p>\n<div style=\"text-align: center;\">\n<figure id=\"attachment_6829\" aria-describedby=\"caption-attachment-6829\" style=\"width: 333px\" class=\"wp-caption aligncenter\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-6829\" src=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-200x300.jpg\" alt=\"Tax paperwork with a sticky note that says &quot;Need help?&quot;\" width=\"333\" height=\"500\" srcset=\"https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-200x300.jpg 200w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-683x1024.jpg 683w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-768x1152.jpg 768w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-1024x1536.jpg 1024w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-1365x2048.jpg 1365w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-1200x1800.jpg 1200w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-65x98.jpg 65w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-225x338.jpg 225w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-350x525.jpg 350w, https:\/\/content-cdn.one.lumenlearning.com\/wp-content\/uploads\/sites\/18\/2023\/06\/14141102\/pexels-nataliya-vaitkevich-6863250_50-scaled.jpg 1706w\" sizes=\"(max-width: 333px) 100vw, 333px\" \/><figcaption id=\"caption-attachment-6829\" class=\"wp-caption-text\">Figure 1. Help Stephan with his taxes<\/figcaption><\/figure>\n<\/div>\n<p>&nbsp;<\/p>\n<p>Stephan has meticulously gathered all his financial documents and organized the information into a neat table (shown below). The table contains information about his earnings and expenditures throughout the year.<\/p>\n<table style=\"width: 540px; margin: auto;\">\n<thead>\n<tr>\n<th style=\"width: 300.302px;\">Category<\/th>\n<th style=\"width: 316.031px;\">Dollar Amount<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"width: 300.635px;\">Full-time job<\/td>\n<td style=\"width: 316.365px;\">[latex]$63,782[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Freelance work<\/td>\n<td style=\"width: 316.365px;\">[latex]$12,829[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Interest from accounts<\/td>\n<td style=\"width: 316.365px;\">[latex]$189[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Tax-deferred retirement<\/td>\n<td style=\"width: 316.365px;\">[latex]$3,600[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Mortgage interest<\/td>\n<td style=\"width: 316.365px;\">[latex]$895[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Property taxes<\/td>\n<td style=\"width: 316.365px;\">[latex]$2,900[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Health savings account<\/td>\n<td style=\"width: 316.365px;\">[latex]$2,400[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Child tax credit<\/td>\n<td style=\"width: 316.365px;\">[latex]$2,000[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 300.635px;\">Earned income tax credit<\/td>\n<td style=\"width: 316.365px;\">[latex]$1,800[\/latex]<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm9615\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=9615&theme=lumen&iframe_resize_id=ohm9615&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n<p>After calculating his taxable income, Stephan, filing as a single person, then proceeds to calculate his federal income tax. He needs to use the tax table given below to calculate the amount of federal income tax he owes based on his estimated taxable income.<\/p>\n<table style=\"width: 716px; margin: auto;\">\n<thead>\n<tr>\n<th style=\"width: 214.167px;\">Tax Rate<\/th>\n<th style=\"width: 419.833px;\">For Single Filers<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td style=\"width: 214.5px;\">[latex]10\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$0[\/latex] to [latex]$11,000[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]12\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$11,000[\/latex] to [latex]$44,725[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]22\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$44,725[\/latex] to [latex]$95,375[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]24\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$95,375[\/latex] to [latex]$182,100[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]32\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$182,100[\/latex] to [latex]$231,250[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]35\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$231,250[\/latex] to [latex]$578,125[\/latex]<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 214.5px;\">[latex]37\\%[\/latex]<\/td>\n<td style=\"width: 420.167px;\">[latex]$578,125[\/latex] or more<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<section class=\"textbox tryIt\"><iframe loading=\"lazy\" id=\"ohm9616\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=9616&theme=lumen&iframe_resize_id=ohm9616&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n","protected":false},"author":23,"menu_order":16,"template":"","meta":{"_candela_citation":"[{\"type\":\"copyrighted_video\",\"description\":\"Tax Documents on the Table\",\"author\":\"Nataliya Vaitkevich\",\"organization\":\"Pexels\",\"url\":\"https:\/\/www.pexels.com\/photo\/tax-documents-on-the-table-6863250\/\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":89,"module-header":"apply_it","content_attributions":[{"type":"copyrighted_video","description":"Tax Documents on the Table","author":"Nataliya Vaitkevich","organization":"Pexels","url":"https:\/\/www.pexels.com\/photo\/tax-documents-on-the-table-6863250\/","project":"","license":"arr","license_terms":""}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4605"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/users\/23"}],"version-history":[{"count":21,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4605\/revisions"}],"predecessor-version":[{"id":15743,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4605\/revisions\/15743"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/parts\/89"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapters\/4605\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/media?parent=4605"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/pressbooks\/v2\/chapter-type?post=4605"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/contributor?post=4605"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/quantitativereasoning\/wp-json\/wp\/v2\/license?post=4605"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}