If a household has $40,000 in taxable income and its tax liability is $4,000, the household's average tax rate is

A) 10 percent.
B) 25 percent.
C) 40 percent.
D) 50 percent

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes according to federal, state, or local laws.

Tax Liability

The total amount of tax that an individual or business owes to the government.

Average Tax Rate

The proportion of total income that is paid as taxes, calculated by dividing the total amount of taxes paid by the total income.