Yvonne Jerc has an adjusted gross income of $75,000, a taxable income of $65,450 and itemized deductions and exemptions totaling $9,550. What is Ms. Jerc’s average effective tax rate?

C. 20.7%

Explanation:

The Effective tax rate is calculated by dividing the tax payable by the taxable income.

The Taxable income is the Adjusted gross income minus deductions and looking at the question, that has already been done for us as the itemized deductions and exemptions totaling $9,550 have already been removed from the Adjusted gross income of $75,000 to remain with a Taxable income of $65,450.

Ms. Jerc therefore falls under the following tax bracket,

Over $36,900 and less than $89,150

$5,535 plus 28% of the excess over $36,900

So calculating her taxes would be,

= $5,535 + 0.28(65,450 - 36,900)

= 5,535 + 7,994

= $13,529

We will then divide this her tax Requirement by her Taxable income to find the Effective Tax Rate,

= 13,529 / 65,450

= 0.20670741023

= 20.7%

So the correct answer is C.

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