Rajesh is filing single and he has an adjusted gross income (AGI) of $\$ 94,000$ for the 2018 tax year. He qualifies for the standard deduction of $\$ 12,000$. Use the following 2018 Federal tax rate schedule to calculate his 2018 Federal income tax.
If your filing status is single;
\begin{tabular}{|c|c|c|}
\hline \begin{tabular}{c}
and taxable \\
income is more \\
than:
\end{tabular} & \begin{tabular}{l}
but not \\
over:
\end{tabular} & your tax is: \\
\hline$\$ 0$ & $\$ 9,525$ & \begin{tabular}{l}
$10 \%$ OF the taxable \\
income
\end{tabular} \\
\hline$\$ 9,525$ & $\$ 38,700$ & \begin{tabular}{l}
$\$ 952.50$ plus $12 \%$ of the \\
excess over $\$ 9,525$
\end{tabular} \\
\hline$\$ 38,700$ & $\$ 82,500$ & \begin{tabular}{l}
$\$ 4,453.50$ plus $22 \%$ of the \\
excess over $\$ 38,700$
\end{tabular} \\
\hline$\$ 82,500$ & $\$ 157,500$ & \begin{tabular}{l}
$\$ 14,089.50$ plus $24 \%$ of \\
the excess over $\$ 82,500$
\end{tabular} \\
\hline$\$ 157,500$ & $\$ 200,000$ & \begin{tabular}{l}
$\$ 32,089.50$ plus $32 \%$ of \\
the excess over $\$ 157,500$
\end{tabular} \\
\hline$\$ 200,000$ & $\$ 500,000$ & \begin{tabular}{l}
$\$ 45,689.50$ plus $35 \%$ of \\
the excess over $\$ 200,000$
\end{tabular} \\
\hline$\$ 500,000$ & & \begin{tabular}{l}
$\$ 150,689.50$ plus $37 \%$ OF \\
THE AMOUNT OVER \\
$\$ 500,000$
\end{tabular} \\
\hline
\end{tabular}
Rajesh's 2018 tax is: \$
(Round to the nearest dollar.)
What is Rajesh's effective tax rate? [Tax paid divided by taxable income]
(Write as a percent, rounded to one decimal place.)
Answer
Finally, calculate Rajesh's effective tax rate by dividing the tax paid by his taxable income and multiplying by 100 to get a percentage. The formula is \(\text{Effective tax rate} = (\text{Tax paid} / \text{Taxable income}) * 100\). Substituting the given values, we get \(\text{Effective tax rate} = ($13,980 / $82,000) * 100 = 17.04878\%\). Rounding to one decimal place, Rajesh's effective tax rate is \(\boxed{17.0\%}\).
Step 1 ：Calculate Rajesh's taxable income by subtracting the standard deduction from his adjusted gross income (AGI). The formula is \(\text{Taxable income} = \text{AGI} - \text{Standard deduction}\). Substituting the given values, we get \(\text{Taxable income} = $94,000 - $12,000 = $82,000\).
Step 2 ：Next, calculate his tax based on the tax rate schedule. His taxable income falls into the third bracket ($38,700 to $82,500), so his tax is calculated as follows: \(\text{Tax} = $4,453.50 + 22\% \text{ of the excess over } $38,700\). Substituting the given values, we get \(\text{Tax} = $4,453.50 + 22\% * ($82,000 - $38,700) = $4,453.50 + 22\% * $43,300 = $4,453.50 + $9,526 = $13,979.50\). Rounding to the nearest dollar, Rajesh's 2018 tax is \(\boxed{$13,980}\).
Step 3 ：Finally, calculate Rajesh's effective tax rate by dividing the tax paid by his taxable income and multiplying by 100 to get a percentage. The formula is \(\text{Effective tax rate} = (\text{Tax paid} / \text{Taxable income}) * 100\). Substituting the given values, we get \(\text{Effective tax rate} = ($13,980 / $82,000) * 100 = 17.04878\%\). Rounding to one decimal place, Rajesh's effective tax rate is \(\boxed{17.0\%}\).
