Individual Tax in Manitoba (2016) A Manitoban has a taxable income of $\$107,000$ . Find the following:

(a) Total taxes payable

(b) Average tax rate

(c) Marginal tax rate

(d) After-tax income

Question

Individual Tax in Manitoba (2016) A Manitoban has a taxable income of [latex]\$107,000[/latex]. Find the following:

(a) Total taxes payable

(b) Average tax rate

(c) Marginal tax rate

(d) After-tax income

Accepted Answer

Data

Taxable income [latex]\$107,000[/latex]

First, we calculate the federal tax. We allot the taxable income to the various tax bands shown in Table 12-1. The first [latex]\$45,282[/latex] is taxed at the lowest rate, [latex]15\%[/latex]. This leaves us with [latex]\$61,718[/latex] to allocate to the higher bands. The next [latex]\$45,282[/latex] of income falls into the band between [latex]\$45,282[/latex] and [latex]\$90,563[/latex], taxed at [latex]20.5\%[/latex]. The final [latex]\$16,437[/latex] of income falls into the [latex]26\%[/latex] band, so our marginal tax rate at the federal level is [latex]26\%[/latex]. We calculate the amount of tax owed on each fraction of income and sum the results to get [latex]\$20,348.52[/latex].

Next, we subtract the federal personal exemption shown in Table 12 2. The table tells us that we needn't pay tax on the first [latex]\$11,474[/latex]. This [latex]\$11,474[/latex] would have been taxed at the lowest rate, [latex]15\%[/latex], so we multiply it by [latex]15\%[/latex] and subtract it from total taxes owed. We then go through a similar calculation at the provincial level.

2016 Federal Individual Rate			Tax per Level
	On the first		[latex]\$45,282.00[/latex]	[latex]15\%[/latex]	[latex]\$6,792,03[/latex]
from	[latex]\$45,282.00[/latex]	to	[latex]\$90,563.00[/latex]	[latex]20.50\%[/latex]	[latex]\$9,282.60[/latex]
from	[latex]\$90,563.00 [/latex]	to	[latex]\$107,000.00[/latex]	[latex]26\%[/latex]	[latex]\$4,723.62[/latex]

					[latex]\frac{}{\$20,348.52}[/latex]
Less non-refundable tax credit			[latex]\$11,474 [/latex]	[latex]15\%[/latex]	[latex]\$1,721.10[/latex]
				Basic federal tax =	[latex]\$18,627.42 [/latex]
2016 Manitoba Provincial Tax
On the first	[latex]\$31,000.00 [/latex]			[latex]10.80\%[/latex]	[latex]\$3,348.00 [/latex]
from	[latex]\$31,000.00[/latex]		[latex]\$67,000 [/latex]	[latex]12.80\%[/latex]	[latex]\$4,608.00[/latex]
above	[latex]\$67,000.00[/latex]			[latex]17.40\%[/latex]	[latex]\$6,960.00[/latex]
					[latex]\frac{}{\$14,916.00}[/latex]
Less non-refundable tax credit			[latex]\$9,134.00[/latex]	[latex]10.80\%[/latex]	[latex]\$986.47.47 [/latex]
			Total federal & provincial taxes payable =		[latex]\$32,556.95[/latex]
Average Tax Rate = Total Federal & Provincial Taxes Payable/Taxable Income =					[latex]30.40\%[/latex]
Marginal Tax Rate = Tax Payable on Next Dollar
				[latex]= 26\% + 17.4\% =[/latex]	[latex]43.4\%[/latex]
After-tax income = [latex]\$74,443.05 [/latex]

2016 Federal Individual Rate			Tax per Level
	On the first		$\$45,282.00$	$15\%$	$\$6,792,03$
from	$\$45,282.00$	to	$\$90,563.00$	$20.50\%$	$\$9,282.60$
from	$\$90,563.00$	to	$\$107,000.00$	$26\%$	$\$4,723.62$

					$\frac{}{\$20,348.52}$
Less non-refundable tax credit			$\$11,474$	$15\%$	$\$1,721.10$
				Basic federal tax =	$\$18,627.42$
2016 Manitoba Provincial Tax
On the first	$\$31,000.00$			$10.80\%$	$\$3,348.00$
from	$\$31,000.00$		$\$67,000$	$12.80\%$	$\$4,608.00$
above	$\$67,000.00$			$17.40\%$	$\$6,960.00$
					$\frac{}{\$14,916.00}$
Less non-refundable tax credit			$\$9,134.00$	$10.80\%$	$\$986.47.47$
			Total federal & provincial taxes payable =		$\$32,556.95$
Average Tax Rate = Total Federal & Provincial Taxes Payable/Taxable Income =					$30.40\%$
Marginal Tax Rate = Tax Payable on Next Dollar
				$= 26\% + 17.4\% =$	$43.4\%$
After-tax income = $\$74,443.05$

Question 12.1: Individual Tax in Manitoba (2016) A Manitoban has a taxable...

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