Swimmy, Inc. had $400,000 in 2018 taxable income. Using the tax schedule from Table 2.3, what are the company's 2018 income taxes, average tax rate, and marginal tax rate, respectively?
$$\begin{array} { l c c c }
& \text { Pay this amount on } & \text { Plus this percentage on } \
\text { Taxable income } & \text { Base income } & \text { anything over the base } \
\$ 0 - \$ 50,000 & \$ 0 & 15 \% \
\$ 50,001 - \$ 75,000 & \$ 7,500 & 25 \% \
\$ 75,001 - \$ 100,000 & \$ 13,75 & 34 \% \
\$ 100,001 - \$ 335,000 & \$ 22,250 & 39\% \
\$335,000-\$10,000,000&\$113,900&34\%
\end{array}$$

Question

Swimmy, Inc. had $400,000 in 2018 taxable income. Using the tax schedule from Table 2.3, what are the company's 2018 income taxes, average tax rate, and marginal tax rate, respectively?
$$\begin{array} { l c c c } 
& \text { Pay this amount on } & \text { Plus this percentage on } \
\text { Taxable income } & \text { Base income } & \text { anything over the base } \
\$ 0 - \$ 50,000 & \$ 0 & 15 \% \
\$ 50,001 - \$ 75,000 & \$  7,500 & 25 \% \
\$ 75,001 - \$ 100,000 & \$  13,75  & 34 \% \
\$ 100,001 - \$ 335,000 & \$  22,250 & 39\% \
\$335,000-\$10,000,000&\$113,900&34\%
\end{array}$$

Quizplus · Accepted Answer

The company's taxable income falls in the $335,000-$10,000,000 bracket, so the tax is $113,900 plus 34% of the amount over $335,000. The income over $335,000 is $65,000 ($400,000 - $335,000). The tax on this is $22,100 (34% of $65,000). Total tax is $113,900 + $22,100 = $136,000. The average tax rate is $136,000 / $400,000 = 34.00%. The marginal tax rate is 34% as it is the rate applied to the last dollar of income.

Swimmy, Inc A) $22,100, 5