Exam ple: Marginal Ve rsus Averag e Rates Suppose you are single and your personal taxable income is 100,000 What is your tax bill? What is the average tax rate? What is the marginal rate?

To calculate your tax bill, we need to know the tax brackets and rates for the given year. Let's assume we are in the United States for the tax year 2023. The federal income tax brackets for a single filer are as follows:<br /><br />- 10% on income up to $11,000<br />- 12% on income from $11,001 to $44,725<br />- 22% on income from $44,726 to $95,375<br />- 24% on income from $95,376 to $182,100<br /><br />Now, let's calculate your tax bill:<br /><br />1. **10% on income up to,**<br /> \[<br /> 10\% \times \$11,000 = \$1,100<br /> \]<br /><br />2. **12% on income from $11,001 to $44,725:**<br /> \[<br /> 12\% \times (\$44,725 - \$11,000) = 12\% \times \$33,725 = \$4,047<br /> \]<br /><br />3. **22% on income from $44,726 to $95,375:**<br /> \[<br /> 22\% \times (\$95,375 - \$44,725) = 22\% \times \$50,650 = \$11,143<br /> \]<br /><br />4. **24% on income from $95,376 to $100,000:**<br /> \[<br /> 24\% \times (\$100,000 -376) = 24\% \times \$4,624 = \$1,111.36<br /> \]<br /><br />Now, sum up all the amounts:<br />\[<br />\text{Total Tax Bill} = \$1,100 + \$4,047 + \$11,143 + \$1,111.36 = \$17,401.36<br />\]<br /><br />So, your tax bill is **$17,401.36**.<br /><br />Next, let's calculate the average tax rate:<br /><br />\[<br />\text{Average Tax Rate} = \frac{\text{Total Tax Bill}}{\text{Taxable Income}} \times 100\%<br />\]<br />\[<br />\text{Average Tax Rate} = \frac{\$17,401.36}{\$100, 100\% = 17.40\%<br />\]<br /><br />So, your average tax rate is **17.40%**.<br /><br />Finally, let's determine the marginal rate:<br /><br />The marginal rate is the rate at which the last dollar of your income is taxed. Since your last dollar falls within the 24% bracket, your marginal rate is **24%**.<br /><br />To summarize:<br />- Your tax bill is **$17,401.36**.<br />- Your average tax rate is **17.40%**.<br />- Your marginal rate is **24%**.