Question

Assume that the tax rate on corporate taxable income up to $50,000 is 15%, and 25% for income levels between $50,001 and $75,000. If the Clumsy Chihuahua Music Company has a taxable income of $55,000, then it has a tax liability of and an average tax rate of . Suppose you want to invest $10,000. You have two options:

Answer 1

Answer: 47.7%

Step-by-step explanation:

Given Data:

Tax rate = 50% for $50,000

25% for $50,001 - 75,000

Clumsy chihuahua taxable income = $55,000

Therefore:

Clumsy chihuahuas taxable income puts him in the 25% tax rate

His first $50,000 incoming would be taxed using 50%

= 0.5 * $50,000

= $25,000

And the remaining $5,000 would be taxed using 25%

= 0.25 * $5000

= $1,250

Tax = $25,000 + $1,250

= $26,250

$26,250 / $55,000 * 100

= 0.477 * 100

= 47.7%

Though he falls on the 25% taxable income rate he would pay 47.7% from his income as tax: