Explore BrainMass

Joe's Fly-By-Night Oil Company: Calculate income tax, marginal rate, and average rate.

Joe's Fly-By-Night Oil Company earned $200,000 last year before-taxes.

a. Calculate how much Joe's owes in income taxes for the year (use the table on page 26 in your textbook).

b. What was Joe's average tax rate?

c. What was Joe's marginal tax rate?

Solution Preview

2008 Tax Brackets
Tax Rate Single
10% Not over $8,025
15% $8,025 - $32,550
25% $32,550 - $78,850
28% $78,850 - $164,550
33% $164,550 - $357,700
35% Over $357,700

First, I didn't have access to the tax table on page 26 of your textbook, so I used the 2008 single filer figures from the IRS. If the above schedule doesn't match your textbook, you should note the answer might be different. However, I can help you to arrive at the right answer by showing you how to solve the problem.

First, let's get his marginal rate. The brackets listed in the schedule above (10%, 15%, 25%, 28%, 33%, and 35%) will be the possible ...

Solution Summary

The solution calculates the income tax, the marginal rate, and the average rate for a given set of financials.