To determine the effective tax rate for a taxable income of [tex]$75,400 using the marginal tax rate chart, follow these steps:
1. Identify the tax brackets and corresponding marginal tax rates.
2. Breakdown the income into each applicable tax bracket and calculate the tax for each portion.
3. Sum up the taxes from each portion to get the total tax.
4. Calculate the effective tax rate by dividing the total tax by the total income and then multiply by 100 to convert it to a percentage.
### Step-by-Step Calculation:
1. Tax Brackets and Marginal Rates:
- $[/tex]0 - [tex]$10,275$[/tex] at [tex]$10\%$[/tex]
- [tex]$10,276 - $[/tex]41,175[tex]$ at $[/tex]12\%[tex]$
- $[/tex]41,176 - [tex]$89,075$[/tex] at [tex]$22\%$[/tex]
- [tex]$89,076 - $[/tex]170,050[tex]$ at $[/tex]24\%[tex]$
- $[/tex]170,051 - [tex]$215,950$[/tex] at [tex]$32\%$[/tex]
- [tex]$215,951 - $[/tex]539,900[tex]$ at $[/tex]35\%
- Over [tex]$539,901$[/tex] at [tex]$37\%
2. Income Breakdown and Tax Calculation:
- First Bracket ($[/tex]0 - [tex]$10,275):
- Taxable Income = $[/tex]10,275[tex]$
- Tax = $[/tex]10,275 0.10 = [tex]$1,027.50$[/tex]
- Second Bracket ([tex]$10,276 - $[/tex]41,175):
- Taxable Income = [tex]$41,175 - $[/tex]10,275 = [tex]$30,900$[/tex]
- Tax = [tex]$30,900 0.12 = $[/tex]3,708.00[tex]$
- Third Bracket ($[/tex]41,176 - [tex]$89,075):
- Taxable Income = $[/tex]75,400 - [tex]$41,175 = $[/tex]34,225[tex]$
- Tax = $[/tex]34,225 * 0.22 = [tex]$7,529.50$[/tex]
3. Sum of taxes from each portion:
- Total Tax = [tex]$1,027.50 (First bracket) + $[/tex]3,708.00 (Second bracket) + [tex]$7,529.50 (Third bracket)
- Total Tax = $[/tex]12,265.00[tex]$
4. Calculate the effective tax rate:
- Effective Tax Rate = (Total Tax / Total Income) * 100
- Effective Tax Rate = ($[/tex]12,265.00 / [tex]$75,400.00) * 100 = 16.27%
Therefore, the effective tax rate for a taxable income of $[/tex]75,400 is 16.27%, making the correct answer:
[tex]$16.27\%$[/tex]
