Engineering Economic Analysis

Corporate Tax Rates

An unmarried student earned $8000 in the summer plus another $2000 during the rest of the year.

When he files an income tax return, he will be allowed one exemption (for himself). He estimates

he spent $1000 on allowable itemized deductions. How much income tax will he pay?

SqLUTION

Adjusted gross income =$8000 + 2000=$10,000

Taxable income=Adjusted gross income

• Deduction for one exemption ($3050)

- Standard deduction ($4750)

= 10,000- 3050- 4750= $2200

Federal income tax=10% (2200) - $220

Corporate Tax Rates

Income tax for corporations is computed in a manner similar to that for individuals. The

data in Figure 12-2 can be presented in the schedule form which follows it.

39% 38%

34% 34% 35%

25%

$100,000 $200,000 $300,000 $400,000

TaxableIncome

$ 10M $15M $18,333,333

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FIGURE 12-2 Corporation federal income tax rates (2003) rates.

45

40

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30

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20

115%

15

10

5

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