Patricia has taxable income of $40,000 on which she pays income tax of $5,778. If Patricia's taxable income increases by $2,000, she will pay an additional tax of $500. What is Patricia's marginal tax rate?

Question

Quizplus · Accepted Answer

The marginal tax rate is calculated by dividing the additional tax paid by the increase in taxable income. Here, $500 additional tax on a $2,000 increase in income results in a marginal tax rate of 25% ($500 / $2000 = 0.25 or 25%).

Patricia Has Taxable Income of $40,000 on Which She Pays