Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $289,740?

Question

BlackTom AI · Accepted Answer

Average tax rate = total tax paid divided by taxable income. For a progressive schedule, compute tax owed in each bracket (marginal taxation), sum them, then divide by $289,740.

Relevant concepts:
- Marginal tax rate applies only to income within each bracket.
- Average (effective) tax rate = (total tax paid) / (taxable income).
- Use bracket widths and their rates to compute tax per bracket.

Step-by-step calculation (showing all intermediate steps):
1) Brackets and rates:
- $0–50,000 at 15%
- $50,001–75,000 (width $25,000) at 25%
- $75,001–100,000 (width $25,000) at 34%
- $100,001–335,000 (income in this bracket = taxable income − 100,000) at 39%

2) Tax per bracket:
- First $50,000: 50,000 × 0.15 = $7,500.00
- Next $25,000: 25,000 × 0.25 = $6,250.00
- Next $25,000: 25,000 × 0.34 = $8,500.00
- Remaining in top bracket: 289,740 − 100,000 = 189,740 taxed at 39% → 189,740 × 0.39 = $73,998.60

3) Total tax = 7,500.00 + 6,250.00 + 8,500.00 + 73,998.60 = $96,248.60

4) Average tax rate = 96,248.60 / 289,740 ≈ 0.33219 = 33.219% → rounded to two decimals = 33.22%

Why the correct answer is correct:
- The calculation uses the marginal rates exactly as applied to each portion of income; dividing the sum of taxes by total income yields the effective (average) rate. The numeric result matches 33.22%.

Why other options are incorrect (briefly):
- 26.68% and 35.87% and 34.67% are numerical miscalculations of the weighted tax; they do not match the bracketed computations above.
- 39.00% is the marginal (top-bracket) rate, not the average rate—average must be lower because portions of income are taxed at lower rates.

Conclusion: The computed average tax rate is 33.22%, which matches the provided answer.

Given the tax rates as shown, what is the average tax rate for a firm with taxable income of $289,740?Single choice

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