MGT 135 Lecture Notes - Lecture 16: Tax Deduction, Flat Tax, Jumpstart Our Business Startups Act
27 Mar 2020
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Beginning in 2018, the tax rate is a flat rate of 21%. Prior to that, it was a progressive rate, with a flat rate of 35% for income that is over. The regular tax is offset, dollar for dollar by any tax credits for which the tax payer is eligible. Therefore, the value of a tax credit is higher than the value of a deduction: for example: with a tentative taxable income of 100,000, the tax before any additional deductions would be computed as follows: ,000 (taxable income) x 21% =21,000 tax due (maybe i suddnely discover an expense i haven"t accounted for, or donate more to charity ) . Scenario 1) effect of an additional 10,000 deduction: the newly computed tax would be: ,100 is tax savings from an additional 10,000 deduction. This could also be computed as ,000 additional deduction x 21% flat tax rate = ,100 tax savings from an additional 10,000 deduction.
