Photo AI
Eimear earns a gross wage of €40 000 per annum with Company A - Leaving Cert Mathematics - Question 1 - 2019
Question 1
Eimear earns a gross wage of €40 000 per annum with Company A. (a) Eimear pays income tax at a rate of 20% on income up to the standard rate cut-off point of €35 30... show full transcript
Worked Solution & Example Answer:Eimear earns a gross wage of €40 000 per annum with Company A - Leaving Cert Mathematics - Question 1 - 2019
Step 1
(a) Find how much income tax she pays per annum.
Answer
To determine Eimear's annual income tax:
-
Calculate Tax on Income up to €35,300:
- Tax = €35,300 × 20% = €7,060
-
Calculate Tax on Remaining Income:
- Remaining Income = €40,000 - €35,300 = €4,700
- Tax on Remaining = €4,700 × 40% = €1,880
-
Add Both Taxes Together:
- Total Tax = €7,060 + €1,880 = €8,940
-
Subtract Tax Credits:
- Net Tax = €8,940 - €1,650 = €7,290
Thus, Eimear pays €7,290 in income tax per annum.
Step 2
(b) Find her annual income after paying tax and health insurance.
Answer
To find Eimear's net annual income:
-
Start with Gross Wage:
- Gross Wage = €40,000
-
Subtract Income Tax:
- Income after Tax = €40,000 - €7,290 = €32,710
-
Subtract Health Insurance Cost:
- Net Annual Income = €32,710 - €1,500 = €31,210
Therefore, Eimear's annual income after paying tax and health insurance is €31,210.
Step 3
(c) Find by how much Eimear's net annual income will increase if she accepts the job with Company B.
Answer
To evaluate the increase in net annual income:
-
Calculate Income Tax for Company B's Gross Wage:
- New Gross Wage = €38,000
- Bonus = €1,500 (tax-free)
- Total New Gross Income = €38,000 + €1,500 = €39,500
-
Calculate Tax on Income up to €35,300 and Remaining:
- Tax on €35,300 = €7,060
- Remaining Income = €39,500 - €35,300 = €4,200
- Tax on Remaining = €4,200 × 40% = €1,680
- Total Tax = €7,060 + €1,680 = €8,740
-
Subtract Tax Credits:
- Net Tax for Company B = €8,740 - €1,650 = €7,090
-
Calculate Net Annual Income for Company B:
- Income after Tax = €39,500 - €7,090 = €32,410
-
Determine the Increase in Net Income:
- Increase = €32,410 - €31,210 = €1,200
Finally, Eimear's net annual income will increase by €1,200 if she accepts the job with Company B.