Question

	Chapter 2 - Master it!
	Using Excel to find the marginal tax rate can be accomplished using the VLOOKUP function. However, calculating the total tax bill is a little more difficult. Below we have shown a copy of the IRS tax table for an individual. Often, tax tables are presented in this format.
		If taxable income is over --	But not over --	The tax is:
		$0	$9,075	10% of the amount over $0
		9,075	36,900	$907.50 plus 15% of the amount over $9,075
		36,900	83,950	$5,081.25 plus 25% of the amount over $36,900
		83,950	186,350	$18,193.75 plus 28% of the amount over $89,350
		186,350	405,100	$45,353.75 plus 33% of the amount over $186,350
		405,100	406,750	$117,541.25 plus 33% of the amount over $405,100
		406,750		$118,188.75 plus 39.6% of the amount over $406.750
	In reading this table, the marginal tax rate for taxable income less than $9,075 is 10%. If the taxable income is between $9,075 and $36,900, the tax bill is $907.50 plus the marginal taxes. The marginal taxes are calculated as the taxable income minus $9,075 times the marginal tax rate of 15%.
	Below, we have the tax table as shown in the textbook, as well as a taxable income.
	Taxable income:		$ 1,350,000
	The corporate income tax table currently in effect is:
		Taxable income is greater than or equal to….	But less than…	Tax rate
		$                  -	$      50,000	15%
		50,001	75,000	25%
		75,001	100,000	34%
		100,001	335,000	39%
		335,001	10,000,000	34%
		10,000,001	15,000,000	35%
		15,000,001	18,333,333	38%
		18,333,334		35%
a.	Create a tax table for corporate taxes similar to the individual tax table shown above.
b.	For a given taxable income, what is the marginal tax rate?
c.	For a given taxable income, what is the total tax bill?
d.	For a given taxable income, what is the average tax rate?
	Master it! Solution
a.		If taxable income is over --	But not over --		The tax is:
		$                  -	$      50,000				15%	of the amount over	$               -
		50,000	75,000		$        7,500	plus	25%	of the amount over	50,000
		75,000	100,000			plus	34%	of the amount over	75,000
		100,000	335,000			plus	39%	of the amount over	100,000
		335,000	10,000,000			plus	34%	of the amount over	335,000
		10,000,000	15,000,000		$ 3,400,000	plus	35%	of the amount over	10,000,000
		15,000,000	18,333,333			plus	38%	of the amount over	15,000,000
		18,333,333	-			plus	35%	of the amount over	18,333,333
b.	The marginal tax rate is:		34%
c.	The total tax bill is:
	Tax on the bottom of marginal tax bracket:				$               -
	Amount of income in marginal tax bracket:
	Total tax:
d.	The average tax rate is:

Answer 1