# Corporate Tax Rate Schedule Range of taxable income Base tax rate + (Marginal rate * amount over...

## Question:

Corporate Tax Rate Schedule

Range of taxable income | Base tax rate | + | (Marginal rate * amount over base braket) |
---|---|---|---|

0 to 50,000 | 0 | + | (15% * amount over $0) |

50,000 to 75,000 | 7,500 | + | (25% * amount over $50,000) |

75,000 to 100,000 | 13,750 | + | (34% * amount over $75,000) |

100,000 to 335,000 | 22,250 | + | (39% * amount over$100,000) |

335,000 to 10,000,000 | 113,900 | + | (34% * amount over $335,000) |

10,000,000 to 15,000,000 | 3,400,000 | + | (35% * amount over $10,000,000) |

15,000,000 to 18,333,333 | 5,150,000 | + | (38% * amount over $15,000,000) |

18,333,333 and up | 6,416,667 | + | (35% * amount over $18,333,333) |

a. Find the marginal tax rate for the following level of corporate earnings before tax: (i) $60,000; and (ii) $150,000

b. For each of the above cases, how much would the company's after tax earnings be?

c. For each of the above cases, what is the effective tax rate?

## Marginal tax rate

Marginal tax rates are an important concept to understand. As the income increases, the tax rate changes at predetermined intervals.

## Answer and Explanation: 1

a.The marginal tax rate at i) $60,000 is 25% because $60,000 is between $50,000 - $75,000. ii)$150,000 is 39% because $150,000 is between $100,000 - $335,000

b. The total tax is the base rate for the interval plus the marginal rate multiplied by net income in that interval.

For $60,000, the total tax = $7,500 + 25% x($60,000 - $50,000) = $10,000. After tax earnings = earnings before tax - total tax = $60,000 - $10,000 = $50,000

For $150,000, the total tax = $22,500 + 39% x($150,000 - $100,000) = $42,000. After tax earnings = earnings before tax - total tax = $150,000 - $42,000 = $108,000

c.The effective tax rate is the total tax amount divided by the net income before tax.

For $60,000, the effective tax rate = $10,000 / $60,000 = 16.67%

For $150,000, the effective tax rate = $42,000 / $150,000 = 28.0%

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Chapter 24 / Lesson 8Learn about the history and concept of marginal tax rates in the United States, including how to calculate marginal income tax rates using formulas and examples.

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