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Income Taxes for a Sole Proprietorship Business

Taxable Income Brackets	Base Tax	+	(Marginal Rate X Amount Over Lower Bracket Amount)
$ 0 to $ 9,525	$ 0	+	(10% amount over $ 0)
9,525 to 38,700	$ 953	+	(12% amount over $ 9,525)
38,700 to 82,500	$ 4,454	+	(22% amount over $ 38,700)
82,500 to 157,500	$ 14,090	+	(24% amount over $ 82,500)
157,500 to 200,000	$ 32,090	+	(32% amount over $157,500)
200,000 to 500,000	$ 45,690	+	(35% amount over $200,000)
Over 500,000	$150,690	+	(37% amount over $500,000)

a. Assume that Andy Larson owns a landscaping business and operates this business as a sole proprietorship. During the current year, Andys business realized a Pre-Tax Income of $135,000.

1. Using the tax schedule for sole proprietorship businesses shown above, calculate the tax liability for Andys business during the current year.

2. What is the average income tax rate applicable to Andys business?

3. What was the marginal income tax rate applicable to Andys business?