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Specific is the most common type. For example, a bottle of wine that normally costs $10 may have a specific excise tax of $2 imposed on it. As per the intent of the excise tax, the additional cost of the wine is passed onto the consumer, making the retail cost of the bottle $12. While this seemingly does not affect the maker of the wine, who ...
Tax Expense = Effective Tax Rate x Taxable Income. For example, let's assume the Company XYZ has an effective tax rate of 35%. The company's taxable income (that is, income net of tax deductions and non-taxable items) is $1,000,000. According to the formula, Company XYZ's tax expense would be: Tax Expense = $1,000,000 x 0.35 = $350,000
For example, let's say that John purchases municipal bonds. The interest on those bonds is tax exempt, so John does not have to pay federal income taxes on that income. Income generated by investments in Roth IRAs is often tax exempt. Likewise, nonprofit organizations are generally tax exempt, meaning that they are not required to pay federal ...
Under a progressive tax system, you might be taxed 0% on the first $25,000, 10% on the next $50,000, and 30% on the remaing $25,000, for a total tax bill of (0 x $25,000) + (0.10 x $50,000) + (0.30 x $25,000) = $12,500. Under a flat-tax system, you might instead simply owe, say, 15% of your taxable income, or $15,000. [InvestingAnswers Feature ...
The total amount of tax you owe could be calculated as follows: (10% of $9,875) + (12% of $29,774) + (22% of $2,315.28) = $6,858.28. In this example, you would owe $6,858.28 in federal income taxes for 2019 before deductions. Since you fell into the 22% tax bracket, you would have a marginal tax rate of 22%. However, because you actually owed ...
Ad valorem (Latin for 'according to the value') taxes are levied solely as a percentage of a property's market value without regard to quantity or intrinsic value. For instance, if the market value of a 2,000 square-foot home is $100,000, the ad valorem tax levied will be based solely on the home's $100,000 value, regardless of its relative ...
A capital gain is the difference between the purchase price (the basis) and the sale price of an asset. The formula for capital gain is: Note that this formula assumes the sale price is higher than the purchase price. If an investor sells an asset for less than he or she paid, this is called a capital loss, and no tax is owed.
Value-Added Tax Example. Let’s say a country has a VAT rate of 10%. The VAT could be applied to different stages of a cupcake’s supply chain as follows: 1. A flour manufacturer buys wheat from a farmer for €8.00, plus a VAT of €0.80 for a total of €8.80.
How Does an Import Duty Work? A duty is a federal tax on imports (or exports). For example, Americans who travel abroad can bring back a certain number of dollars' worth of items without paying a duty on those times. If the traveler brings back more than the allowed dollar amount worth of items, he or she must pay the tax (which varies ...
How Does a Taxpayer Work? For example, let's assume that Jane is an employee of Company XYZ. She earns $150,000 per year. In addition to paying federal income taxes, unemployment taxes, Social Security taxes, and Medicare taxes, Jane will likely owe state and local income taxes, all of which will be withheld from her paycheck. When she receives ...