Paul makes $75,000. Tax rates are as follows:- 0% on income from $0 - $12,000- 10% on income from $12,000 - $24,000- 25% on income from $24,000 - $65,000- 35% on income from $65,000 and above**Question:**What is Paul’s effective tax rate?**Options:**- $14,950- 19.9%- 35%- 25%**Explanation:**To calculate Paul’s effective tax rate, we must first determine the total tax paid:1. Income from $0 to $12,000 is taxed at 0%, so the tax is $0.2. Income from $12,001 to $24,000 is taxed at 10%: - Tax = ($24,000 - $12,000) x 10% = $1,200.3. Income from $24,001 to $65,000 is taxed at 25%: - Tax = ($65,000 - $24,000) x 25% = $10,250.4. Income from $65,001 to $75,000 is taxed at 35%: - Tax = ($75,000 - $65,000) x 35% = $3,500.Total tax paid = $1,200 + $10,250 + $3,500 = $14,950.Effective tax rate is calculated as: (Total tax paid / Total income) x 100= ($14,950 / $75,000) x 100 = 19.9% Thus, Paul’s effective tax rate is 19.9%.

Slab RateIncomeTax rateTax Amount$ 0 - $ 12000120000%0$ 12000 - $ 240001200010%1200$ 24000 - $…

оо Paul makes $75,000. 0% on income from $0 - $12,000 10% on income from $12,000 - $24,000 25% on income from $24,000 - $65,000 35% on income from $65,000 + What is Paul's effective tax rate? $14,950 19.9% 35% 25%

оо Paul makes $75,000. 0% on income from $0 - $12,000 10% on income from $12,000 - $24,000 25% on income from $24,000 - $65,000 35% on income from $65,000 + What is Paul's effective tax rate? $14,950 19.9% 35% 25%

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Filing Federal Income Tax Return

A tax is the amount of money paid to the government on the revenue earned by the individual or business organization. It acts as an income for the government and an expense for the individual or business organization. There are different regulations regarding filing an income tax return in other countries.

Question

Paul makes $75,000.

Tax rates are as follows:
- 0% on income from $0 - $12,000
- 10% on income from $12,000 - $24,000
- 25% on income from $24,000 - $65,000
- 35% on income from $65,000 and above

**Question:**
What is Paul’s effective tax rate?

**Options:**
- $14,950
- 19.9%
- 35%
- 25%

**Explanation:**
To calculate Paul’s effective tax rate, we must first determine the total tax paid:

1. Income from $0 to $12,000 is taxed at 0%, so the tax is $0.
2. Income from $12,001 to $24,000 is taxed at 10%:
- Tax = ($24,000 - $12,000) x 10% = $1,200.
3. Income from $24,001 to $65,000 is taxed at 25%:
- Tax = ($65,000 - $24,000) x 25% = $10,250.
4. Income from $65,001 to $75,000 is taxed at 35%:
- Tax = ($75,000 - $65,000) x 35% = $3,500.

Total tax paid = $1,200 + $10,250 + $3,500 = $14,950.

Effective tax rate is calculated as: (Total tax paid / Total income) x 100
= ($14,950 / $75,000) x 100 = 19.9%

Thus, Paul’s effective tax rate is 19.9%.

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