Certified Financial Planner (CFP) Practice Exam · Question
Michael earned $100,000 in employment income and $20,000 in eligible dividends from Canadian corporations. If his total federal and provincial taxes paid were $35,000, what is his average tax rate?
The average tax rate is calculated by dividing total taxes paid by total income. In this case, $35,000 / ($100,000 + $20,000) = $35,000 / $120,000 = 0.29166, or
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Question: Michael earned $100,000 in employment income and $20,000 in eligible dividends from Canadian corporations. If his total federal and provincial taxes paid were $35,000, what is his average tax rate?
Answer options:
- 29.17% ✅ 35.00%
- 30.00%
- 28.33%
Correct answer: 35.00%
Explanation: The average tax rate is calculated by dividing total taxes paid by total income. In this case, $35,000 / ($100,000 + $20,000) = $35,000 / $120,000 = 0.29166, or 29.17%.
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