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If your income is $65,000, with income up to $17,000 subject to a 10% tax rate and incomeabove $17,000 subject to 15% tax rate, then your average tax rate is

Question

If your income is 65,000,withincomeupto65,000, with income up to 17,000 subject to a 10% tax rate and income above $17,000 subject to 15% tax rate, then your average tax rate is

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Solution

To calculate the average tax rate, you first need to calculate the total tax paid.

  1. Calculate the tax for the income up to 17,000:Thisissubjecttoa1017,000: This is subject to a 10% tax rate, so the tax paid on this portion of the income is 17,000 * 10% = $1,700.

  2. Calculate the tax for the income above 17,000:Thisissubjecttoa1517,000: This is subject to a 15% tax rate. The income above 17,000 is 65,00065,000 - 17,000 = 48,000.So,thetaxpaidonthisportionoftheincomeis48,000. So, the tax paid on this portion of the income is 48,000 * 15% = $7,200.

  3. Add the tax paid on both portions of the income to get the total tax paid: 1,700+1,700 + 7,200 = $8,900.

  4. Finally, calculate the average tax rate by dividing the total tax paid by the total income, and then multiply by 100 to get a percentage: (8,900/8,900 / 65,000) * 100 = 13.69%.

So, the average tax rate is 13.69%.

This problem has been solved

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