Question

1:1-40 Tax Rates. Based on the amounts of taxable income below, compute the federal income tax payable in 2018 on each amount assuming the taxpayers are married filing a join return. Also, for each amount of taxable income, compute the average tax rate and the marginal tax rate. a. Taxable income of $30,000. b. Taxable income of $100,000. c. Taxable income of $375,000. d. Taxable income of $700,000.

Answer 1

1.The assesee is a couple who is married and will be filing the income jointly.

2.We need to calculate the federal income tax payable and compute average rate of tax and marginal rate for each item.

3.

Married and Filing Jointly	Tax Rate for 2018	Amount of Income in the Slab	Working
$0 to $19,050	10%	19050	(19050-0)
$19,050 to $77,400	12%	58350	(77400-19050)
$77,400 to $165,000	22%	87600	(165000-77400)
$165,000 to $315,000	24%	150000	(315000-165000)
$315,000 to $400,000	32%	85000	(400000-315000)
$400,000 to $600,000	35%	200000	(600000-400000)
Over $600,000	37%

4.Now let us calculate tax liabilty

Taxable Income	Tax Rate	$30,000	Tax Thereon	$100,000	Tax Thereon	$375,000	Tax Thereon	$700,000	Tax Thereon
$0 to $19,050	10%	19,050	1,905	19,050	1,905	19,050	1,905	19,050	1,905
$19,050 to $77,400	12%	10,950	1,314	58,350	7,002	58,350	7,002	58,350	7,002
$77,400 to $165,000	22%			22,600	4,972	87,600	19,272	87,600	19,272
$165,000 to $315,000	24%					150,000	36,000	150,000	36,000
$315,000 to $400,000	32%					60,000	19,200	85,000	27,200
$400,000 to $600,000	35%							200,000	70,000
Over $600,000	37%							100,000	37,000
		30,000	3,219	100,000	13,879	375,000	83,379	700,000	198,379
Average Tax ( Tax Liab/ Total Income)			11%		14%		22%		28%
			(3219/30,000)
Marginal Rate of Tax			12%		22%		32%		37%