Question

Timmy Tappan is single and had $204,000 in taxable income. Using the rates from Table
2.3 in the chapter, calculate his income taxes.
a. What is the average tax rate? (Do not round intermediate calculations and enter
your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
b. What is the marginal tax rate? (Do not round intermediate calculations and enter
your answer as a percent rounded to the nearest whole number, e.g., 32.)

Answer 1

Jimmy's Average Tax Liability is $26.96%. See the computation below.

What is the justification for the above result?

Average Tax Liability = Total Tax Liability/Taxable Income.

= $41,495.50/$189,000

=21.96%

See the attached image.

What is the marginal tax rate?

Marginal tax rate refers to the additional tax paid on the additional income.

Hence, Timmy's Marginal Tax rate on additional Income is 32%

See the attached image for more information.

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