Scot and Vidia, married taxpayers, earn $240,000 in taxable income and $5,000 in interest from an...

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Scot and Vidia, married taxpayers, earn $240,000 in taxable income and $5,000 in interest from an investment in City of Tampa

The tax is: 11 taxable income is over: But not over: S O S 9,700 10% of taxable income $ 9.700 $ 39,475 8970 plus 12% of the

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Answer 1

Answer #1

Answer a and b:

Marginal tax rate Marginal tax rate 24.00 % 22.00% b.

Working:

Answer (a):

Filing status: Married filing jointly

Interest on investment in City of Tampa bonds is tax free.

Taxable income = $240,000

Income tax on taxable income of $240,000 = 28765 + (240000 - 168400) * 24% = $45,949

If Scot and Vidia earn additional taxable income of $80,000:

Total taxable income = 240000 + 80000 = $320,000

Income tax on taxable income of $320,000 = 28765 + (320000 - 168400) * 24% = $65149

Marginal tax rate on this additional income = (65149 - 45949) / 80000 = 24.00%

Answer (b):

If Scot and Vidia have additional deduction of $80,000:

Total taxable income = 240000 - 80000 = $160,000

Marginal tax rate on taxable income of $160,000 = 22.00%

As such:

Marginal tax rate if they report deduction of $80000 = 22.00%

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Answer 2

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