Question

If a household has $40,000 in taxable income and its tax liability is $20,000, the household's average tax rate is a. 10 percent. b. 25 percent. c. 40 percent.

Answer 1

Answer:

50% (not given in the options)

Explanation:

The household tax liability is a fraction of the household income. It is computed by applying the tax percentage to the household income.

Given

Household income = $40000

Tax liability (assuming this is same as the tax expense) = $20000

Average tax percentage = ($20000/$40000) × 100%

= 50%