The BandRates function

Summary In a progressive tax system, different portions of a person's income are taxed at different rates. This article discusses how to use Genie's BandRates custom function to calculate total tax owed, across several tax brackets. BandRates, tax calculation, Genie, custom function Topic keywords Support topics in this article Other articles referred to Related articles Excel versions applicable to Tier Who wrote Word count When written Example files Special instructions Excel 2000, Excel 2002, Excel 2003, Excel 2007, Excel 2010 1 AbleOwl published article Grant Anderson, AbleOwl 824 May 2012

Marie works for Roberts, Rogers and Rover, an accounting firm. It's that time of year again, when she needs to calculate the tax owed by each client. A progressive tax system uses a series of tax brackets, like the ones shown below, so (according to this table) someone earning 21,000 would pay no tax on the first $5,000, 8% on the next $15,000 and 12% on the last $1,000. You might say it's (ahem) taxing Creating an Excel formula that will calculate the correct tax for a given income is no simple task! Marie feels somewhat daunted by the prospect. That night, her dreams are filled with VLOOKUP, exactand approximate-matches, and extra columns and rows crammed with formulae. In the morning, she remembers that she recently subscribed to AbleOwl's Excel Genie, and wonders if it contains a tool that could solve her problem. She follows these steps: (1) In Excel 2007/2010, choose ESP | Comp | Insert component (Alt S CM), as shown right. In Excel XP/2003, choose ESP | Components (Alt S C), or click the Components button on the GenieOnline toolbar (shown right). The Genie utilities, components, and templates dialog box appears. (2) Set the Sub-type drop-down to 'fml Formula', as shown below right. The dialog box displays only the Components that relate to formulae. Marie sees "Function to calculate banded rates (such as tax brackets)" and thinks "Aha!" (3) Select Function to calculate banded rates (such as tax brackets), as shown below.

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The Later avail. column shows whether there is an updated version of this component ('y' if there is, 'n' if there isn't). If there is an updated version, you can download it easily. (4) If there is a 'y' in the Later avail. column for this component, choose Download. (5) Choose Install. Genie installs the BandRates function into Marie's workbook, and displays the message shown below. (As this is a custom function, it needs to be installed into each workbook in which it is used).

"That sounds easy enough", thinks Marie. She switches to her tax calculation worksheet, mClients (shown right). (6) In Excel 2007/2010, choose Formulas | Insert Function (Alt M F). In Excel XP/2003, choose Insert | Function (Alt I F).

In any of the above versions, you can also click the Insert Function button to the left of the Formula bar, as shown right. The Insert Function dialog box appears. (7) Select User Defined from the Or select a category drop-down. BandRates appears in the Select a function pane, as shown below.

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Marie can see that BandRates takes two arguments: an amount and a BandTable. She already has the amounts that she needs to calculate tax on, but she's not sure what a BandTable is. (8) Choose Help on this function. A Help dialog box appears, as shown below. It contains an explanation of the BandRates arguments. Marie can see that her rates table needs to list the upper value for each bracket in the left column, and the corresponding rates in the right column. (9) Close the Help window. She sets her rates table up on a separate sheet, dTaxRates; it appears as shown right. The final bracket ("Over 200,000") needs an upper value, so she selects one that is higher than the annual income of any of her clients. (10) Select M15. (11) Enter =BandRates(L15, dTaxRates!$K$14:$L$20) This calculates that the tax for Di O'Bolic's income of $56,700 is $5,740, as shown below. That's $5,000 untaxed, $15,000 taxed at 8% ($1,200), $35,000 at 12% ($4,200) and $1,700 taxed at 20% ($340). All of these calculations are performed, and the answer returned, in a single cell, by Genies BandRates function. (12) Copy the formula down. And Marie's tax nightmares are gone! Her sleep is instead filled with sweet dreams of Genie. Note that the BandRates function appears in proper case rather than as BANDRATES. This is your clue that it's a custom function, rather

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than a built-in Excel function. It's also worth mentioning that BandRates isn't restricted to performing tax calculations (though that application alone would justify its existence for many!). Another common use for this type of calculation is in figuring mileage allowances. Often, the allowance per kilometre decreases as the distance travelled increases; for example, $0.90/km for the first 5,000 kilometres, $0.80/km for the next 5,000, and so on. The pricing for multiple Genie subscribers might seem like magic, but in fact it uses BandRates!

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