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Marginal Tax Rate Chart

\begin{tabular}{|l|l|}
\hline
Tax Bracket & Marginal Tax Rate \\
\hline
\begin{tabular}{l}
\[tex]$0-\$[/tex]10,275
\end{tabular} & 10\% \\
\hline
\[tex]$10,276-\$[/tex]41,175 & 12\% \\
\hline
\[tex]$41,176-\$[/tex]89,075 & 22\% \\
\hline
\[tex]$89,076-\$[/tex]170,050 & 24\% \\
\hline
\[tex]$170,051-\$[/tex]215,950 & 32\% \\
\hline
\[tex]$215,951-\$[/tex]539,900 & 35\% \\
\hline
\[tex]$539,901 and above & 37\% \\
\hline
\end{tabular}

The piecewise function for the marginal tax rate is:
\[
f(x)=\left\{\begin{array}{ll}
0.10x, & 0 \leq x \leq 10,275 \\
0.12x - 205.50, & 10,276 \leq x \leq 41,175 \\
0.22x - 4,323.00, & 41,176 \leq x \leq 89,075 \\
0.24x - 6,104.50, & 89,076 \leq x \leq 170,050 \\
0.32x - 19,708.50, & 170,051 \leq x \leq 215,950 \\
0.35x - 26,187.00, & 215,951 \leq x \leq 539,900 \\
0.37x - 36,985.00, & x \geq 539,901
\end{array}\right.
\]

Determine the effective tax rate for a taxable income of \$[/tex]63,425. Round the final answer to the nearest hundredth.

A. 10\%

B. 14.67\%

C. 15.18\%

D. 22\%



Answer :

GinnyAnswer
To determine the effective tax rate for a taxable income of \[tex]$63,425 using the provided marginal tax rate chart and bracket formulas, follow these steps: 1. Determine the tax bracket of the given income (\$[/tex]63,425) using the tax bracket ranges:
- \[tex]$0 to \$[/tex]10,275: 10%
- \[tex]$10,276 to \$[/tex]41,175: 12%
- \[tex]$41,176 to \$[/tex]89,075: 22%
- \[tex]$89,076 to \$[/tex]170,050: 24%
- \[tex]$170,051 to \$[/tex]215,950: 32%
- \[tex]$215,951 to \$[/tex]539,900: 35%
- \[tex]$539,901 and above: 37% \$[/tex]63,425 falls into the \[tex]$41,176 to \$[/tex]89,075 bracket, which has a marginal tax rate of 22%.

2. Use the piecewise function for the appropriate tax calculation:
- For \[tex]$41,176 to \$[/tex]89,075, the function is [tex]\(0.22x - 4,323.00\)[/tex].

3. Substitute \[tex]$63,425 for \(x\) in the formula: \[ \text{tax} = 0.22 \times 63,425 - 4,323.00 \] 4. Calculate the tax: \[ \text{tax} = 0.22 \times 63,425 - 4,323.00 \] \[ \text{tax} = 13,953.50 - 4,323.00 \] \[ \text{tax} = 9,630.50 \] 5. Compute the effective tax rate: \[ \text{effective tax rate} = \left(\frac{\text{tax}}{\text{income}}\right) \times 100 \] \[ \text{effective tax rate} = \left(\frac{9,630.50}{63,425}\right) \times 100 \] \[ \text{effective tax rate} \approx 15.18\% \] Therefore, the effective tax rate for a taxable income of \$[/tex]63,425 is approximately [tex]\( \boxed{15.18\%} \)[/tex].

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