Katarina, a single taxpayer, has total income from all sources of $100,000 for 2018. Her taxable income after taking into consideration $25,000 in deductions and $10,000 in exclusions is $65,000. Katarina's tax liability is $10,240. What are Katarina's marginal, average, and effective tax rates?

Question

Quizplus · Accepted Answer

To find Katarina's marginal tax rate, we need to look at the tax bracket table for 2018. A single taxpayer with taxable income of $65,000 falls in the 22% tax bracket. Therefore, her marginal tax rate is 22%.

To find Katarina's average tax rate, we divide her total tax liability by her total income. 
Average tax rate = Tax liability / Total income = $10,240 / $100,000 = 0.1024...
Average tax rate = 10.24% or 15.8%

To find Katarina's effective tax rate, we divide her total tax liability by her taxable income after deductions and exclusions. 
Effective tax rate = Tax liability / (Taxable income - Deductions - Exclusions) = $10,240 / ($65,000 - $25,000 - $10,000) = 0.137...
Effective tax rate = 13.7%

Therefore, the best choice is D, with a marginal tax rate of 22%, an average tax rate of 15.8%, and an effective tax rate of 13.7%.

Katarina, a Single Taxpayer, Has Total Income from All Sources