Question

Assume a tax rate of 15% on the first $45,000 of income and a rate of 30% on income in excess of $45,000. What is the amount of income tax expense for Fit and Fun?

Answer 1

The marginal tax rate is the rate at which additional income is taxed. For the first $45,000 of income, the rate is 15% and for income above $45,000, the rate is 30%. To calculate the income tax expense for Fit and Fun, you need to know their income. Assuming it is $60,000, the total tax expense would be $11,250.

Step-by-step explanation:

The marginal tax rate refers to the rate at which additional income is taxed. In this case, for the first $45,000 of income, the tax rate is 15%. Any income above $45,000 is taxed at a higher rate of 30%. To calculate the income tax expense for Fit and Fun, you would need to know the amount of their income. Let's assume their income is $60,000. Here's the breakdown:

1. The income tax on the first $45,000 is $45,000 * 0.15 = $6,750.
2. The income above $45,000 is $60,000 - $45,000 = $15,000.
3. The income tax on the additional $15,000 is $15,000 * 0.30 = $4,500.

Therefore, the total income tax expense for Fit and Fun would be $6,750 + $4,500 = $11,250.