Question

How do I create a formula on Microsoft Excel that will create tax deductions by 15% on salaries less than $30,000, but 28% on salaries equal or greater than $30,000?

Answer 1

To calculate tax deductions in Excel, use the IF function with the formula =IF(A1<30000, A1*0.15, A1*0.28) to apply a 15% tax on salaries below $30,000 and a 28% tax on salaries of $30,000 and above.

Step-by-step explanation:

To create a formula in Microsoft Excel that applies a tax deduction of 15% on salaries less than $30,000, and 28% on salaries equal to or greater than $30,000, you can use the IF function. Here's an example of such a formula:

=IF(A1<30000, A1*0.15, A1*0.28)

In this formula, A1 represents the cell where the salary is input. If the salary is less than $30,000, Excel multiplies the salary by 0.15 (15%) to calculate the tax amount. If the salary is $30,000 or more, Excel multiplies the salary by 0.28 (28%) to calculate the tax amount.

For instance, if the taxable income is $20,000, the tax computed by the formula would be $20,000 * 0.15, which equals $3,000. Similarly, for a taxable income of $35,000, the tax would be $35,000 * 0.28, resulting in $9,800.

The marginal tax rate concept suggests that the rate at which the last dollar of income is taxed may differ from the lower brackets. However, for the purpose of this Excel formula, the marginal tax rate difference is not applicable since two distinct rates are given based on the salary range provided.