Question

Campbell, a single taxpayer, earns $302,000 in taxable income and $6,800 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule). Required: a. If Campbell earns an additional $21,000 of taxable income, what is her marginal tax rate on this income? b. What is her marginal rate if, instead, she had $21,000 of additional deductions? (For all requirements, do not round intermediate calculations.) % a. b. Marginal tax rate Marginal tax rate

2019 tax rate schedule

Answer 1

a.

Answer: 35%

The marginal tax rate is the rate of tax that is applicable on the last dollar of taxable income. Since the taxpayer is single, the taxable income of ($302,000 + $21,000 =) $323,000 falls under the bracket ($204,101 to $510,300); the corresponding rate is 35% under the tax schedule 2019.

b.

Answer: 35%

If additional deduction is $21,000, the taxable income would become ($302,000 - $21,000 =) $281,000. It falls under the bracket ($204,101 to $510,300); the corresponding rate is 35% under the tax schedule 2019.

  

Note: interest income from state-investment is not a part of taxable income.