Question

ABCD Company has a taxable income of $610,000. Find out the following:

A) Total tax Obligation   

B) Average tax rate

C) Marginal tax rate

Answer 1

Sol:-

Company’s tax liability on $610.000 :

	2017 (as per tax rate below note -1)	2018 (as per tax rate below note -2)
Total taxes due	=$113,900 + [0.34*(610,000-335,000)] =$113,900+$93,500 =$207,400	=610,000*21% =$128,100
After-tax earnings	=$610,000- $207,400 =$402,600	=$610,000-$128,100 =$481,800
Average tax rate	=$207,400/$610,000 *100 =34%	=$128,100/$610,000 *100 =21%
Marginal tax rate:	=34%	=21%

Note-1

Corporate Tax Rate Schedule (2005 through 2017)

If taxable income is:

Over	But not over	Tax is	Of amount over
$0	$50,000	15%	$0
50,000	75,000	$7,500 + 25%	50,000
75,000	100,000	13,750 + 34%	75,000
100,000	335,000	22,250 + 39%	100,000
335,000	10,000,000	113,900 + 34%	335,000
10,000,000	15,000,000	3,400,000 + 35%	10,000,000
15,000,000	18,333,333	5,150,000 + 38%	15,000,000
18,333,333	____	35%	0

Note :-2    Corporate Tax Rate Schedule (2018 onwards)

Flat 21% on taxable income over 0$