If Susie earns $750,000 in taxable income and files as head of household for year 2017, what is Susie's average tax rate? (Use tax rate schedule.)
A) 33.71%
B) 35.00%
C) 33.05%
D) 39.60%
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Using the 2017 tax rate schedule for head of household, the tax liability can be calculated as follows:

- The first $9,325 is taxed at 10% = $932.50 
- The next $28,625 ($37,950 - $9,325) is taxed at 15% = $4,293.75 
- The next $53,950 ($91,900 - $37,950) is taxed at 25% = $13,487.50 
- The next $54,400 ($146,750 - $91,900) is taxed at 28% = $15,232 
- The next $18,550 ($165,300 - $146,750) is taxed at 33% = $6,123.50 
- Susie's taxable income exceeds the top bracket of $165,300, so the remaining amount is taxed at 35%. 
- The amount over the top bracket is $584,700 ($750,000 - $165,300), so the tax on that amount is $204,645

Adding up all of the taxes gives a total tax liability of $244,714.25.

To find the average tax rate, divide the total tax liability by the taxable income:

Average tax rate = Total tax liability / Taxable income 
= $244,714.25 / $750,000 
= 0.32619 (rounded to five decimal places)

Multiply by 100 to express as a percentage:

Average tax rate = 32.619%

The closest choice is C) 33.05%.

If Susie Earns $750,000 in Taxable Income and Files as Head