How to Calculate Marginal Tax Rate in Excel (2 Quick Ways)

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

• Insert the following formula in cell D6.

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.

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

The basic formula for calculating Tax Payable is:

• Use the following formula in cell F10.

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

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

• Use the following formula in cell F15.

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:

To calculate the Total Taxable Income Per Annum,

• Use the following formula in cell D6.

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.

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

The basic formula for calculating Tax Payable is:

• Use the following formula in cell F10.

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

• Drag the Fill Handle to cell F12 to copy the formula.

• Use the following formula in cell F15.

The total Tax Payable amount is $5,000.

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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