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The table opposite shows the amounts and rates of Income Tax on varying amounts of net income from $2,000 to $10,000,000. It is assumed that the individual taxpayer is entitled to $2,000 personal exemption. Obviously income which is free from tax under the statute, such as municipal bond interest, is not considered "net income." The columns headed "Average Rate of Tax on Net Income" is a calculation of the rate at which the net income as a whole is taxed. Other rates appearing throughout the table do not constitute the tax levied upon the entire net income, but are the rates levied against the top part only of such income.
In the use of the table an allowance must, of course, be made for any items of income which are free from certain, but not all, of income tax rates. For example, dividends from domestic and certain foreign corporations are not liable for any normal tax. Also interest received from all Liberty Loan bonds is free from the normal tax and in certain cases free from the surtax. Thus the total amount of tax to be paid at any income level shown in the table will be less than the figure noted to the extent of the exemption which the taxpayer enjoys in connection with his dividend, Liberty Bond interest, etc.
This table may be used by non-resident alien individuals as to income arising within the United States by making the following adjustments: on an income of $3,000 add $60 to the amount of total tax; on an income of $4,000 add $120 to such tax; for $5,000 add $180; on an income of $6,000 or over add $240.
Table of Income Tax
The first and last columns are of particular importance. The other columns are given for statistical information and to show the method of arriving at the total.
Table of Income Tax
The first and last columns are of particular importance. The other columns are
The following method may be used in computing the amount of income tax due on a net income of $45,000. The individual taxpayer is assumed to have a personal exemption of $2,000. For convenience and simplicity the normal and surtax rates have been combined in the example:
Amount of Tax
Personal exemption of $2,000...
6% on $3,000 (Amt. exceeding $ 2,000 not exceeding $ 5,000).