Question

Problem 1-38 (LO 1-3) (Algo) Jorge and Anita, married taxpayers, earn $90,400 in taxable income and $55,000 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 % %

Answer 1

a)Federal Tax
Taxable Income	$90,400
Taxable Income	Tax Rate
Tax = $9235 + 22% x ($90400 - $80250)	$11,468
Jorge and Anita will owe $11468 in federal income tax .
b) Average Tax Rate = Total Tax/ Taxable Income
Average tax rate = $11468/90400	12.69%
c) Effective Tax Rate = Total Tax/Total Income
Effective Tax Rate = $11,468/($90400 + $55000)	7.89%
d)
Current marginal tax rate	22.00%