If you owe $6,414.95 in federal income tax and are taxed at a net rate of 17%, what was your taxable income?

• A. $30,000
• B. $37,735
• C. $40,000
• D. $42,000

Answer: (B)

To find the taxable income when you know the federal income tax owed and the net tax rate, you can use the formula:

Taxable Income = Tax Owed / Tax Rate.

In this scenario, you're given that the tax owed is $6,414.95 and the net tax rate is 17%, which is represented as 0.17 in decimal form.

Using the formula:

Taxable Income = $6,414.95 / 0.17 = $37,735.

This calculation shows that the initial amount of taxable income that results in a tax owed of $6,414.95 at a rate of 17% is indeed $37,735. By understanding how to rearrange the relationship between tax owed and tax rate, you can appropriately calculate taxable income based on any given tax owed and tax percentage.

Thus, this correct numerical assessment aligns perfectly with the provided options, confirming that $37,735 is the right taxable income.