Given the tax rates as shown,what is the average tax rate for a firm with taxable income of $126,500?

Question

Quizplus · Accepted Answer

To find the average tax rate, we need to divide the total tax by the taxable income.

For taxable income of $126,500:
- The first $50,000 is taxed at a rate of 15%, which equals $7,500
- The next $25,000 is taxed at a rate of 25%, which equals $6,250
- The next $25,000 is taxed at a rate of 34%, which equals $8,500
- The remaining $26,500 is taxed at a rate of 39%, which equals $10,335

The total tax is $32,585.

Therefore, the average tax rate is:
$32,585 ÷ $126,500 × 100% = 25.76%

Given the Tax Rates as Shown,what Is the Average Tax