Question

If you are in the 28% tax bracket and owe $20,000 on $100,000 of taxable income, your average tax rate and marginal tax rate would be, respectively:

Answer 1

A person, who is in the 28% tax bracket and owes $20,000 on $100,000 of taxable income, has d. 20% for average and 28% for marginal.

What are average and marginal tax rates?

The average tax rate is the product of tax liability over taxable income, multiplied by 100.  The marginal tax rate is the product of the additional tax paid over additional taxable income, multiplied by 100.

Data and Calculations:

Tax bracket = 28%

Taxable income = $100,000

Tax liability = $20,000

Average tax rate = 20% ($20,000/$100,000 x 100)

Marginal tax rate = 28%

Answer Options:

a. 24% for average and 28% for marginal

b. 28% for both

c. Impossible to determine

d. 20% for average and 28% for marginal

Thus, a person, who is in the 28% tax bracket and owes $20,000 on $100,000 of taxable income, has d. 20% for average and 28% for marginal.

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