Solved:
Answered by AI, Verified by Human Experts
If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced?
If Diane was in a 25% tax bracket and received a $1,000 tax credit, by how much would her taxes be reduced? (a) $25
(b) $50
(c) $250
(d) $500
(e) $1,000
Final answer:If Diane was in a 25% tax bracket and received a $1,000 tax credit, her taxes would be reduced by $250, thus the correct option is c.Explanation:To calculate the reduction in Diane's taxes, we need to multiply her tax credit by her tax bracket percentage. Given that Diane is in a 25% tax bracket, the calculation is as follows:Tax reduction = Tax credit × Tax bracket percentage= $1,000 × 25%= $1,000 × 0.25= $250Therefore, Diane's taxes would be reduced by $250. Tax credits are directly subtracted from the total tax liability, providing a dollar-for-dollar reduction. In this scenario, Diane benefits from a significant reduction in her tax burden, which is crucial in optimizing her overall financial situation. This approach to calculating tax reduction ensures clarity in understanding the impact of tax credits on an individual's tax liability, facilitating informed financial decision-making, thus the correct option is c....