Question

2018 Tax Rate Schedules Individuals Schedule X-Single If taxable income is over: But not over: The tax is $ 9,525 10% of taxable income $ 9,525 $ 38,700 S 82,500 $952.50 plus 12 % of the excess over $9,525 38,700 S S2,500 $4,453.50 plus 22% of the excess over $38,700 $14,089.50 plus 24% of the excess over $82,500 $157,500 $32,089.50 plus 32% of the excess over $157,500 $157,500 $200,000 $200,000 $500,000 $45,689.50 plus 35% of the excess over S200,000 $150,689.50 plus 37% ofthe excess over $500,000 $500,000 Schedule Y-1-Married Filing Jointly or Qualifying Widow(er) The tax is 10% oftaxable income хсеss If taxable income is over: But not over $ 19,050 $1,905 plus 12% of the excess over $19,050 $8,907 plus 22% of the excess over $77,400 19,050 77,400 $ 77,400 $165,000 $28,179 plus 24 % of the excess over $165,000 $64,179 plus 329% of the excess over $315,000 $315,000 $165,000 $315,000 $400,000 $91,379 plus 35% of the excess over $400,000 $161,379 plus 37% of the excess over $600,000 $600,000 $400,000 $600,000 Schedule Z-Head of Household If taxable income is over: But not over The tax is: 0 $13,600 10% of taxable income $ 51,800 13,600 $1,360 plus 12 % of the excess over $13,600 $5,944 plus 22% of the excess over $51,800 51,800 82,500 $12,698 plus 24% of the excess over $82,500 S2,500 $157,500 $30,698 plus 32% of the excess over $157,500 $44,298 plus 35% of the excess over $200,000 $157,500 $200,000 $500,000 $200,000 $149,298 plus 37% of the excess over $500,000 $500,000 Schedule Y-2-Married Filing Separately If taxable income is over: But not over: The tax is: 10% oftaxable income 9,525 $952.50 plus 12 % of the excess over $9,525 9,525 $38,700 $4,453.50 plus 22% of the excess over $38,700 $14,089.50 plus 24% of the excess over $82,500 $32,089.50 plus 32% of the excess over $157,500 $45,689.50 plus 35% of the excess over $200,000 38,700 S2,500 S2,500 $157,500 $157,500 $200,000 $200,000 $300,000 $80,689.50 plus 37% of the excess over S300,000 $300,000

Answer 1

Tax on normal Income of $57,500.
Tax = $4,453.50 + ($57,500 - $38,700) * 22%
Tax = $8,589.50

a). Addtional taxable income of $39,500.
Total taxable income = $57,500 + $39,500 = $97,000
Tax = $14,089.50 + ($97,000 - $82,500) * 24%
Tax = $17,569.50

Marginal tax rate = Change in tax / Change in Income
= ($17,569.50 - $8,589.50) / ($97,000 - $57,500)
= $8,980 / $39,500
= 0.2273 or 22.73%

b). Addtional deduction of $39,500.
Total taxable income = $57,500 - $39,500 = $18,000
Tax = $952.50 + ($18,000 - $9,525) * 12%
Tax = $1,969.50

Marginal tax rate = Change in tax / Change in Income
= ($1,969.50 - $8,589.50) / ($18,000 - $57,500)
= $-6,620 / $-39,500
= 0.1676 or 16.76%