In the following picture, we have a dataset of four columns. The first column is **Bracket**. This column has two sub-columns, **Lower Bound **and **Upper Bound**. We have put some sample tax brackets ranging from **$0 **to **$60,001** and above.

The next column is **Tax Rate **which has all the marginal tax rates ranging from **0% **to **50%**. The next two columns are **Taxable Income **and **Tax Payable**. We will use this dataset to demonstrate calculating marginal tax rates in Excel.

### Method 1 – Calculate the Marginal Tax Rate Without Deduction

We have **Gross Income Per Annum **as **$52,000 **and a **Total Deduction** of **0**.

- Insert the following formula in cell
**D6**.

`=D4-D5`

- Press
**Enter**.

The formula returns the **Total Taxable Income Per Annum** is **$52,000**.

#### Allocate the Total Taxable Income

We need to distribute the taxable amount to the corresponding tax brackets.

- The first tax bracket
**($0 to $10,000)**gets**$10,000**. - Next tax bracket
**($10,001 to $20,000)**gets**$10,000**. - Third tax bracket
**($20,001 to $40,000)**gets**$20,000**. - The fourth tax bracket
**($40,001 to $60,000)**gets the remainder**$12,000**. - To calculate the sum of all taxable income, insert the following formula in cell
**E15**, then press the**Enter**button.

`=SUM(E10:E13)`

The formula also returns **$52,000**. This means the taxable income distribution is okay.

The basic formula for calculating **Tax Payable **is:

`Tax Payable = Tax Rate * Taxable Income`

- Use the following formula in cell
**F10**.

`=D10*E10`

Here, **D10 **refers to the **Tax Rate **and **E10 **refers to the **Taxable Income**.

- Press
**Enter**

- Drag the
**Fill Handle**up to cell**F13**to copy the formula.

This returns the corresponding **Tax Payable **amount for all tax brackets.

- Use the following formula in cell
**F15**.

`=SUM(F10:F13)`

- Press
**Enter**.

The total **Tax Payable **amount is **$9,800**. So, for a total taxable income amount of **$52,000**, the marginal tax rate is **40%**. It’s because the 4th portion of the **Taxable Income **falls under the 4th tax bracket of **40% Marginal Tax Rate**.

### Method 2 – Calculate the Marginal Tax Rate with Deductions

Consider the following:

**Gross Income Per Annum**is**$52,000**.**The total Deduction**is**$12,000**.

To calculate the **Total Taxable Income Per Annum**,

- Use the following formula in cell
**D6**.

`=D4-D5`

- Press
**Enter**.

The formula returns **$40,000**, so the total taxable income per annum is **$40,000**.

#### Allocate the Total Taxable Income

We’re distributing the total taxable income to the brackets.

- The first tax bracket
**($0 to $10,000)**gets**$10,000**. - Next tax bracket
**($10,001 to $20,000)**gets**$10,000**. - Third tax bracket
**($20,001 to $40,000)**gets**$20,000**. - Use the following sum in E15 to double-check the distribution.

`=SUM(E10:E12)`

The formula also returns **$40,000**. This means the taxable income distribution is okay.

The basic formula for calculating **Tax Payable **is:

`Tax Payable = Tax Rate * Taxable Income`

- Use the following formula in cell
**F10**.

`=D10*E10`

Here, **D10 **refers to the **Tax Rate **and **E10 **refers to the **Taxable Income**.

- Press
**Enter**.

- Drag the
**Fill Handle**to cell**F12**to copy the formula.

- Use the following formula in cell
**F15**.

`=SUM(F10:F12)`

- Press
**Enter**.

The total **Tax Payable **amount is **$5,000**.

**Read More:** How to Calculate Federal Tax Rate in Excel

## Practice Section

You will get an Excel sheet like the following screenshot at the end of the provided Excel file where you can practice calculating the taxes.

**Download the Practice Workbook**

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