Certified Financial Planner (CFP) Practice Exam · Question
Which of the following describes the marginal tax rate?
The marginal tax rate is the tax rate applied to the next dollar of income earned, indicating the tax impact of additional income.
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Question: Which of the following describes the marginal tax rate?
Answer options:
- The total tax paid divided by total income. ✅ The tax rate applied to the last dollar of income earned.
- The highest tax rate applicable in the country.
- The average tax rate plus provincial surtaxes.
Correct answer: The tax rate applied to the last dollar of income earned.
Explanation: The marginal tax rate is the tax rate applied to the next dollar of income earned, indicating the tax impact of additional income.
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