Microsoft Excel Tutorial: Excel Formula to Calculate a Progressive Income Tax Rate.

Welcome to another episode of the MrExcel Podcast, where we teach you all about Excel. In this episode, we will be discussing how to create a formula for progressive tax rates. This topic was inspired by a comment from Asad on YouTube, who was struggling to come up with a formula to calculate his income tax using an income tax statement downloaded from office.com.

To get started, we will need to create a table with three columns using the information from Asad's income tax card. This table will be crucial in solving the problem. We will use the VLOOKUP function, specifically the approximate match version, to find the base tax rate, percentage, and start of the level. By subtracting the start level from the income for the period, multiplying it by the percentage, and adding the base, we can calculate the tax for that specific income level.

But what if you want to create a single formula without having the lookup table in the workbook? Well, we have a solution for that too. By using the Ctrl+’ shortcut, we can copy a formula down one cell without changing the references and leave it in edit mode. Then, we can use the F9 trick from Mike Girvin, also known as Excel Is Fun, to embed the lookup table into the formula. This will create one monster formula that can do everything without the lookup table.

We understand that this may seem like a complicated formula, especially if you are using it for homework. That's why we recommend breaking it down into smaller formulas and checking each one individually to ensure accuracy. And if you're looking to expand your Excel skills even further, be sure to check out my new book, Power Excel with MrExcel, the 2017 Edition, which includes topics such as Power BI and Power Query.

Thank you for tuning in to this episode of the MrExcel Podcast. We hope you found this tutorial on progressive tax rates helpful. Don't forget to subscribe to our channel for more Excel tips and tricks. And if you have any questions or suggestions for future episodes, please leave them in the comments below. See you next time for another netcast from MrExcel.

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Table of Contents:
(00:00) Calculating income tax
(00:23) Setting up a table for progressive tax rates
(01:14) Using the VLOOKUP function to calculate tax
(02:59) Checking and simplifying the formula
(04:01) Embedding the lookup table into the formula
(05:15) Tips for creating a successful formula
(06:00) Clicking Like really helps the algorithm

Asad asks for a formula to calculate a progressive income tax rate. Set up a table in ascending order with the amounts from your income tax card
You will do three Approximate Match VLOOKUPS to get the base tax, the percentage and the start of the level
Subtract the Start Level from the income for the period. Multiply by the percentage.
Used Ctrl+' to copy a formula down one cell without changing the references
Using the F9 trick from Mike Girvin to embed the lookup tables in the formula.

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