Dove Company pays taxes of 25% on their first $30,000 of pretax income and 40% on any taxable income in excess of $30,000.The current pretax income is $45,000.What is the marginal tax rate for Dove Company?

Question

Quizplus · Accepted Answer

Marginal tax rate is the tax rate that is applied to the next dollar of taxable income. In this case, Dove Company's taxable income is $45,000 - $30,000 = $15,000, which is subject to a 40% tax rate. Therefore, the marginal tax rate for Dove Company is 40%.

Dove Company Pays Taxes of 25% on Their First $30,000