Use the marginal tax rate chart to answer the question.
Marginal Tax Rate Chart:
Tax Bracket
Marginal Tax Rate
$0–$10,275
10%
$10,276–$41,175
12%
$41,176–$89,075
22%
$89,076–$170,050
24%
$170,051–$215,950
32%
$215,951–$539,900
35%
> $539,901
37%
Determine the effective tax rate for a taxable income of $95,600. Round the final answer to the nearest hundredth.
17.00%
17.61%
22.70%
24.00%
To determine the effective tax rate, we need to find the marginal tax rate bracket that includes the taxable income of $95,600. In this case, the taxable income falls within the $89,076–$170,050 bracket, which has a marginal tax rate of 24%.
The effective tax rate is the average tax rate that a taxpayer pays on their total income. To calculate it, we need to multiply the marginal tax rate by the taxable income percentage within the bracket.
In this case, the taxable income of $95,600 falls within $89,076–$170,050 bracket, which is a range of $170,050 - $89,076 = $80,974.
The taxable income is $95,600 - $89,076 = $6,524 above the lower end of the bracket.
The percentage of the taxable income within the bracket is therefore $6,524 / $80,974 ≈ 0.0806.
Finally, we can calculate the effective tax rate by multiplying this percentage by the marginal tax rate:
Effective tax rate = 0.0806 × 24% = 0.019344 ≈ 0.0193
Rounding to the nearest hundredth, the effective tax rate for a taxable income of $95,600 is approximately 1.93%, which is equivalent to 17.61%.
Therefore, the correct answer is 17.61%.