An investor has a marginal tax rate of 37 per cent and an average tax rate of 32 per cent this year. The appropriate tax rate to be applied on the dividend income generated from their share investment is:

Question

Quizplus · Accepted Answer

The appropriate tax rate to be applied on the dividend income generated from their share investment is the marginal tax rate as it is the rate at which the highest amount of tax will be imposed on the investor's income. The average tax rate may be lower because it takes into account the various tax brackets and deductions, whereas the marginal tax rate only applies to the last dollar earned. Therefore, the investor will save the most on taxes by using their marginal tax rate.

An Investor Has a Marginal Tax Rate of 37 Per