In: Finance
Please refer to the following tax schedule.
Taxable Income
Tax Rate
$ 0-50,000 15%
$ 50,001-75,000 25%
$ 75,001-100,000
34%
$100,001-335,000
39%
If BOB's Inc. had $300,000 of taxable income last year selling tools
What is the average tax rate?
What is the marginal tax rate?
What is the firm’s tax liability?
SHOW ALL WORK
Calculation of firm Tax Liablity Tax Liablity
For First $50000 rate is 15 % $7500
For next $25000 rate is 25 % $6250
For next $25000 rate is 34 % $8500
For balance $200000 rate is 39 % $78000
Total tax liablity of firm is $100250
Calculation of average tax rate :
Average tax rate = Total tax liablity / total income *100
$100250/$300000*100 = 33.42%
Calculation of Marginal tax rate
Marginal tax rate is higher tax on incereaing income ie 39 %