Question

Tax Year 2019

Campbell, a single taxpayer, earns $205,000 in taxable income and $6,000 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule.) Required: a. How much federal tax will she owe? b. What is her average tax rate? c. What is her effective tax rate? d. What is her current marginal tax rate? Jorge and Anita, married taxpayers, earn $42,000 in taxable income and $32,500 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Federal tax Average tax rate Effective tax rate Marginal tax rate Scot and Vidia, married taxpayers, earn $92,500 in taxable income and $5,000 in interest from an investment in City of Tampa bonds. (Use the U.S. tax rate schedule for married filing jointly). Required: a. If Scot and Vidia earn an additional $80,000 of taxable income, what is their marginal tax rate on this income? b. What is their marginal rate if, instead, they report an additional $80,000 in deductions?

Answer 1

Answer to first question in the list:

a) Campbell's current taxable income The tax is: But not over: Add: Additional taxable income Total taxable income $205,000 (For a single taxpayer] $0 [Interest income from NY stock is exempted] $205,000 plus If taxable income is over: $0 $9,700 $39,475 $84,200 $160,725 $204,100 $510,300 Federal tax she owe $46,943.5 ($46628.5+($205000-$204100)x35%] $9,700 10% of taxable income $39,475 $970 $84,200 $4,543 plus $ 160,725 $14,382.50 plus $204,100 $32,748.50 plus $510,300 $46,628.50 plus $153,798.50 plus 12% 22% 24% 32% 35% 37% of the exc $9,700 of the exc $39,475 of the exc $84,200 of the exc $160,725 of the exc $204,100 of the exc $510,300 b) Average tax rate = (Federal tax she owe / Total taxable income) x 100 Federal tax she owe Total taxable income Average tax rate $46,943.5 [As calculated in Part-(a)] $205,000 [As explained in Part-(a)] 22.90% [($46943.5 / $205000) x 100] 2019 Tax Rate Schedule --> Schedule X- Single Tax Payer c) Effective tax rate = (Federal tax she owe / Total income) x 100 Federal tax she owe Total taxable income Effective tax rate $46,943.5 [As calculated in Part-(a)] $211,000 ($205000 + $6000 (Incl. interest income)] 22.25% [($46943.5 / $211000) x 100] d) Current marginal tax rate = Maximum tax slab rate at which taxpayer's taxable income falls. In the given case, Campbell's taxable income falls in 35% slab rate, marginal tax rate is 35.00%.