Calculating Income Tax- Bracket 1

Lesson 2: Personal Taxes - Calculating Income Tax Bracket 1

   Constructing Knowledge

Federal income tax is calculated at different rates, depending upon income level. For the purposes of this course, you will calculate federal and provincial income tax deductions combined and then subtract that amount from the gross pay. The following table will be the rates used in this course.

Federal and Provincial Income Tax Table

Bracket	Tax Rate	Income Level
1	25%	the first $43 561 of income
2	32%	income over $43 561 but under $87 123
3	36%	income over $87 123 but under $135 054
4	39%	income over $135 054

It does not matter how much money you make; the first $43 561 earned is taxed at 25%.

   Multimedia

A video describing calculating income tax when income is in the first tax bracket is provided.

EXAMPLE 1

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Justine has a job working at a fast food restaurant. She made $24 500 last calendar year. How much income tax did she pay?

Solution

Income tax	= tax rate × gross pay
	= 25% × $24 500
	= 0.25 × $24 500
	= $6125.00

Justine paid $ 6125.00 in income tax.

EXAMPLE 2

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What is the maximum income tax that would be paid in the first tax bracket?

Solution

Income tax	= tax rate × gross pay
	= 25% × $43 561
	= 0.25 × $43 561
	= $10 890.25

A maximum of $10 890.25 would be paid in the first tax bracket.




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