Question

Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.)

Required:

1. If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income?
2. What is his marginal rate if, instead, he had $40,000 of additional deductions?

(For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.)

a	Marginal tax rate	____%
b	Marginal tax rate	_____%

Answer 1

page: 01 Answer Given details chuet couns in taxable income = $75000 interest - $10,000 using tax rate schedule. Required 21x calculation of marginal tax rate assuming that check caring an additional $410,000 of taxable income calculate chuck's tax liability when his taxable income is $ 75000 Taxable income - $ 75000 Tax liability = $4453, 50+ [ 445000-$38400) x22:4] = $12439,50 now calculate chuck's tax liability asseeming that chuck earns an additional £40,000 of tocable income . Taxable income = $45000+ $40000 $ 115000 .

page :02 Tax liability $14089 15000-$ 82500)x 244, = $81889.50 Therefore, chmut's marginal tax rate = { $ $1889.50-$12439.50) ( $115000 - 875000) 9450 $ 40000 = 0.2363 >23.636% (b) calculation of morginal tax rate assuming that check has an additional į 40,000 of deductions calculate chuck's tax liability when his taxable income is $ 75000 Taxable income = $ 75,000 Tax liability = $44531 50+{C$75000-838400) x 224 =$12439.50 now calenlate. chuck's tax liability assaiming that Chuck has an additional $ 40,000

page-03 dedeutions Taxable income = $. 75000 - $.40000 = $ 35000 Tax liability - $959.50+{{ $35000-$9525) *12..] $4009.55 Therefore, chuck's marginal tax rate = ($12439.50 - $4009.50) . (15000 - $35000) 21.08. marginal fax rate marginal tax rate 03.63.1. 21.08.%.