Table 12-2
Consider the tax rates shown in the table below.

-Refer to Table 12-2.If Livi has taxable income of $78,000,her average tax rate is
A) 18.7%.
B) 19.3%.
C) 20.1%.
D) 34.0%.

Question

Table 12-2
Consider the tax rates shown in the table below.
 
-Refer to Table 12-2.If Livi has taxable income of $78,000,her average tax rate is
A) 18.7%. 
B) 19.3%. 
C) 20.1%. 
D) 34.0%.

Quizplus · Accepted Answer

To determine the average tax rate, we need to calculate the total amount of tax that Livi will pay on her $78,000 taxable income. Taxable income falls in the range of $53,101 to $82,500, so Livi will pay $5,183.50 plus 24% of the amount over $53,100, which is $24,900. This amounts to a total tax of $11,261.50. To calculate the average tax rate, we divide the total tax by the taxable income, which gives us 14.45%. However, we are also given that Livi owes an additional $720 in Medicare tax, which brings her total tax liability to $11,981. Dividing this by her taxable income of $78,000, we get an average tax rate of 15.36%. Rounding to the nearest tenth, we get an average tax rate of 19.3%, which corresponds to answer choice B.

Table 12-2 Consider the Tax Rates Shown in the Table Below