Question

Carol, a single TP, earns $75,000 in taxable income and $10,000 in interest from an investment in the City of Chicago bonds (non-taxable). Using the U.S. tax rate schedule:

1. How much federal income tax will she owe?
2. What is her average tax rate?
3. What is her effective tax rate?
4. If Carol earns an additional $40,000 of taxable income, what is her marginal tax rate?
5. What if she had $40,000 of additional deductions instead?

Answer 1

In the Books of Carol Co.
=	4991.25	+	25%		38750		14678.75	Fedral Income
	=	In this Problem Carol Fit into 25% Capacity U.S. Tax Rate Schedule
	Particulars		Formula		Solutions			Percentage
	Avg Tax Rate	=	Total Tax	=	14678.75	*	100	19.57167	%
			Taxable Income		75000
	Effective tax rate	=	Total Tax	=	14678.75	*	100	17.26912	%
			Taxable Income		(75000+10000)
A.	Marginal Tax Rate	=	Total Tax	=	(25493.25-14678.75)	*	100	27.03625	%
			Taxable Income		(115000-75000)
B.	Marginal Tax Rate	=	Total Tax	=	(4803.75-14678.75)	*	100	24.6875	%
			Taxable Income		(35000-75000)
Note : All amounts are in $