3. Your earnings after deductions and exemptions are $100,000 and your filing status is single.

Step Income Tax Brackets Taxable Amount *Tax Rate Tax 1 $0 to $9,275 Earnings within 10% bracket $ 9,275 *0.10 $ 927.50 2 $9,276 to

$37,650 Earnings within 15% bracket $ 28,375 *0.15 $ 4256.25 3 $37,651 to

$91,150 Earnings within 25% bracket $ 53,500 *0.25 $13,375.00 4 $91,151 to

$100,000 Earnings within 28% bracket $ 8,850 *0.28 $2,478.00 5 Total tax $21,036.75 6 Average tax rate = 0.21 or 21%

($21,036.75/$100,000)

To determine your total marginal tax rate, complete the following steps:

1. $9,275 of the $100,000 is taxed at 10%. $9,275 × 0.10 = $927.50 in taxes.

2. $28,375 ($37,650 − $9,275) of $100,000 is taxed at 15%.

$28,375 × 0.15 = $4,256.25 in taxes.

3. $53,500 ($91,150 − $37,650) of $100,000 is taxed at 25%.

$53,500 × 0.25 = $13,375.00 in taxes.

4. $8,850 ($100,000 − $91,150) of $100,000 is taxed at 28%.

$8,850 × 0.28 = $2,478.00 in taxes.

5. Add all the taxes ($927.50 + $4,256.25 + $13,375.00 + $2,478.00 = $21,036.75)

and the sum will be your total federal tax liability.

In contrast, your average tax rate is calculated as $21,036.75 (the amount you paid in taxes) divided by $100,000 (your taxable income) = 0.21 or 21%.

The average tax rate (21%) is lower than the marginal tax rate (28%) because you are taxed less on the first dollar you make than on the last dollar you make.

What are the marginal and average tax rates for taxable earnings of $30,000 if you are filing single status?