Slide MGT312 Slide02

Income Taxes

Income Taxes

Progressive and Marginal Tax

Rates

• Taxes are compulsory government-imposed charges levied on citizens and their property. • Progressive income tax is the tax rate which

increases as taxable income increase.

• Marginal tax rate is the tax rate which is

Marginal Tax Rates

Segment of taxable

income Marginal tax rate (%)

Marginal Tax and Average Tax

•Marginal tax rate affects financial decisions.

•Effective marginal tax rate is the total marginal tax rate paid.

•_{Average tax rate is lower than marginal}

Step 1: Determine Total Income

• Various types of income includes

▫Wages and salaries

▫Commissions

▫Bonuses

▫Royalty

▫_{Rent income}

Step 1: Determine Total Income

(ctd)

•Capital gain occurs when selling price is more than purchase price.

•Capital loss occurs when selling price is less than purchase price.

•_{Long-term gain (loss) is taxed lower than}