Question

Use the marginal tax rate chart to answer the question.

Determine the effective tax rate for a taxable income of $118,600. Round the final answer to the nearest hundredth.

17.50%
18.85%
22.39%
24.00%

Answer 1

18.85%

Explanation:

$118,600 is between $89,076 and $170,050, so the amount above $89,076 pays 24%.

$118,600 - $89,076 = $29,524

24% of $29,524 = $7085.76

The first $10,275 pays 10%.

10% of $10,275 = $1,027.50

The amount from $10,276 to $41,175 pays 12%

$41,175 - $10,276 = $30,899

12% of $30,899 = $3707.88

The amount from $41,176 to $89,075 pays 22%

$89,075 - $41,176 = $47,899

The next $47,899 pays 22%.

22% of $47,899 = $10,537.78

Total tax paid:

$7085.76 + $1,027.50 + $3707.88 + $10,537.78 = $22,358.92

$22,358.92 as percent of $118,600

percent = part/total × 100%

percent = $22,358.92/$118,600 × 100%

percent = 18.85%