Average tax rate is calculated by dividing the actual tax paid by taxable income. Based on the tax profile of the taxpayer the tax slabs might differ from the average tax rate. Since the marginal tax rate is different for each bracket the tax amount will be calculated differently on each bracket of the dollar amount.
Assume an individual has a taxable income of $43,000, as per current marginal tax brackets for individuals (Reference IRS website), the tax liability will be as follows.
|
TAX BRACKET |
TAX RATE |
TAX LIABILITY |
|
35%, for incomes over $207,350 |
35% |
- |
|
32% for incomes over $163,300 |
32% |
- |
|
24% for incomes over $85,525 |
24% |
- |
|
22% for incomes over $40,125 |
22% |
632.50 |
|
12% for incomes over $9,875 |
12% |
3,630.12 |
|
10% for income up to $9,875 |
10% |
987.50 |
|
|
|
5,250.12 |
The average tax rate will then be:
Average tax rate = 5250.12 / 43000 = 12.21%
Song earns $100,000 taxable income as an interior designer
Using the facts from the previous problem, what will happen to
The Capital-Ideas Company is in its development stage and is
Congress would like to increase tax revenues by 10 percent. Assume
In Integrative Case 10.1, we projected financial statements for
Ben Bates graduated from college six years ago with a finance undergraduate
Suppose that B2B, Inc. has a capital structure of 37
Suppose that MNINK Industries’ capital structure features 63 percent equity, 7
In 2016, Jennifer (Jen) Liu and Larry Mestas founded
Johnny Cake Ltd. has ten million shares of stock outstanding selling
