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 calculate the total amount of taxes paid and divide it by the taxable income.

For a taxable income of $126,500, the tax liability is calculated as follows:

- On the first $50,000: 15% = $7,500 
- On the next $25,000: 25% = $6,250 
- On the next $25,000: 34% = $8,500 
- On the next $26,500: 39% = $10,335

Total taxes paid = $32,585

The average tax rate is therefore:

Average tax rate = Total taxes paid / Taxable income 
= $32,585 / $126,500 
= 0.2576 or 25.76%

Therefore, the answer is C, 25.76%.

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