To find the effective tax rate for a taxable income of [tex]$95,000, we will follow a step-by-step process of calculating the total tax using the given marginal tax rates for different income brackets. We will then determine the effective tax rate.
1. Income Brackets and Tax Rates:
- \$[/tex]0 - \[tex]$10,275 at 10%
- \$[/tex]10,276 - \[tex]$41,175 at 12%
- \$[/tex]41,176 - \[tex]$89,075 at 22%
- \$[/tex]89,076 - \[tex]$170,050 at 24%
- \$[/tex]170,051 - \[tex]$215,950 at 32%
- \$[/tex]215,951 - \[tex]$539,900 at \(3 \times \pi / 100\)
- Over \$[/tex]539,900 at [tex]\(3 \times \pi / 100\)[/tex]
2. Breaking Down the Tax Calculation:
- For the first bracket (\[tex]$0 - \$[/tex]10,275):
- Income within the bracket: \[tex]$10,275
- Tax: \$[/tex]10,275 \times 0.10 = \[tex]$1,027.50
- For the second bracket (\$[/tex]10,276 - \[tex]$41,175):
- Income within the bracket: \$[/tex]41,175 - \[tex]$10,275 = \$[/tex]30,900
- Tax: \[tex]$30,900 \times 0.12 = \$[/tex]3,708.00
- For the third bracket (\[tex]$41,176 - \$[/tex]89,075):
- Income within the bracket: \[tex]$89,075 - \$[/tex]41,176 = \[tex]$47,899
- Tax: \$[/tex]47,899 \times 0.22 = \[tex]$10,537.78
- For the fourth bracket (\$[/tex]89,076 - \[tex]$95,000):
- Income within the bracket: \$[/tex]95,000 - \[tex]$89,076 = \$[/tex]5,924
- Tax: \[tex]$5,924 \times 0.24 = \$[/tex]1,421.76
- Adding up the tax from all brackets up to \[tex]$95,000:
- Total tax: \$[/tex]1,027.50 + \[tex]$3,708.00 + \$[/tex]10,537.78 + \[tex]$1,421.76 = \$[/tex]16,694.92
3. Effective Tax Rate Calculation:
- Effective Tax Rate:
[tex]\[
\text{Effective Tax Rate} = \left( \frac{\text{Total Tax}}{\text{Taxable Income}} \right) \times 100
\][/tex]
[tex]\[
\text{Effective Tax Rate} = \left( \frac{\$16,694.92}{\$95,000} \right) \times 100 \approx 17.5736\%
\][/tex]
4. Rounded Effective Tax Rate:
- The effective tax rate rounded to the nearest hundredths is approximately 17.57%.
Therefore, the effective tax rate for a taxable income of \$95,000 is 17.57%.
