The statutory marginal tax rate for income levels between $0 and $100,000 is 25%. The statutory marginal tax rate for income levels above $100,000 is 50%. A family with a child purchases 800 hours of childcare per year. The hourly rate for childcare was $10 in 2020. Families can deduct childcare expenditures up to $8,000. One spouse worked during the year while the other spouse did not earn income. The spouse that worked can claim a tax credit of $6,000. There is an inflation rate of 100% between 2020 and 2021. The family that earned $100,000 in 2020 earns $200,000 in 2021. The hourly wage of childcare also doubles to $20 in 2021. There is no change in income brackets used to calculate tax liabilities, tax credits, or deduction limits. What is the effective tax rate?

Tax liabilities consist of the total amount of tax payments that a household is required to make,…

Answered: The statutory marginal tax rate for…

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The statutory marginal tax rate for income levels between $0 and $100,000 is 25%. The statutory marginal tax rate for income levels above $100,000 is 50%. A family with a child purchases 800 hours of childcare per year. The hourly rate for childcare was $10 in 2020. Families can deduct childcare expenditures up to $8,000. One spouse worked during the year while the other spouse did not earn income. The spouse that worked can claim a tax credit of $6,000.

1. There is an inflation rate of 100% between 2020 and 2021. The family that earned $100,000 in 2020 earns $200,000 in 2021. The hourly wage of childcare also doubles to $20 in 2021. There is no change in income brackets used to calculate tax liabilities, tax credits, or deduction limits. What is the effective tax rate?

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