Question

For 2020, the California marginal income tax brackets for single individuals are as follows: 50 - SR808 156 $8.809 - 520.882 29 $20.08) - 32.959 $32.960 - 545,752 6% $45,753-357X23 8% $57.834.5295372 9.3% 5295.373$354.444 10.3% 5354445 - $590,741 11.3% $590,742 - $1,000,000 12.3% $1.000,001 13.3% For 2020, the United States marginal income tax brackets for single individuals are as follows: 50 - 59.875 10% 59.876 - 540,125 12% $40,126.585,525 22% $85.526 - $163,300 $163,301 - 5207,350 32% $207,351 - 5518.400 38% $518,401 37% 24% Samuel Silverton is a single software engineer living in Silicon Valley. For 2020, Samuel will earn $1.500,000. Not considering FICA tax, property tax, gas tax, sales tax, or city tax what is the average income tax rate (both federal and state) that Samuel will pay on his 2020 caring? Round your wwwer to one decimal place (ex: 103)

Answer 1

Calculation of Average Federal Income tax rate:

Taxable Income = $1,500,000

Federal Income tax = ($9,875 * 10%) + (($40,125 - $9,875) * 12%) + (($85,525 - $40,125) * 22%) + (($163,300 - $85,525) * 24%) + (($207,350 - $163,300) * 32%) + (($518,400 - $207,350) * 35%) + (($1,500,000 - $518,400) * 37%) = $519,427

Average Federal Income Tax Rate = Federal Income Tax / Taxable Income = $519,427 / $1,500,000 = 34.6%

Calculation of Average State Income tax rate:

Taxable Income = $1,500,000

State Income tax = ($8,808 * 1%) + (($20,882 - $8,808) * 2%) + (($32,959 - $20,882) * 4%) + (($45,752 - $32,959) * 6%) + (($57,823 - $45,752) * 8%) + (($295,372 - $57,823) * 9.3%) + (($354,444 - $295,372) * 10.3%) + (($590,741 - $354,444) * 11.3%) + (($1,000,000 - $590,741) * 12.3%) + (($1,500,000 - $1,000,000) * 13.3%) = $174,262.80

Average State Income Tax Rate = State Income Tax / Taxable Income = $174,262.80 / $1,500,000 = 11.6%

Combined Average Income tax rate = (Federal tax + State tax) / Taxable Income = ($519,427 + $174,262.80) / 1,500,000 = 46.2%