Katie pays $10,000 in tax-deductible property taxes. Katie’s marginal tax rate is 32%, average tax rate...
- Katie pays $10,000 in tax-deductible property taxes. Katie’s
marginal tax rate is 32%, average tax rate is 28%, and effective
tax rate is 25%. Katie's tax savings from paying the property tax
is:
- $1,600
- $2,500
- $2,800
- $3,200
- $10,000
Homework Answers
As Katie's marginal tax rate is 32%, her tax savings from the property will be equal to amount paid by her in tax deductible property taxes (i.e. $10,000) multiplied by marginal tax rate (i.e. 32%). The average tax rate and effective tax rate is not relevant for calculating tax savings from paying the property tax.
Katie's tax savings from paying the property tax = Amount paid in property taxes*Marginal tax rate
= $10,000*32% = $3,200
Therefore, Katie's tax savings from paying the property tax is $3,200.
Hence the correct option is d) $3,200.
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