Question

A married (MFJ) taxpayer, earns $60,000 per year in taxable income and an additional $12,000 per year in city of Boston bonds. If the TP earns an additional $35,000 in taxable income in year 2019, what is his marginal tax rate (rounded) on this income?

A. 16.59%

B. 18.29%

C. 12.00%

D. 17.03%

E. 22.00%

Which of the following statements is false? (There could be more than one answer)

A. Municipal bond interest is subject to implicit tax.
B. All of these statements are true.
C. Municipal bond interest is subject to explicit federal tax.
D. None of these statements is true.
E. Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk.

Answer 1

First Question answer would be (a) 16.59%

How I derived 16.59% - please see below step line by line with help of 2019 Tax rate

a Married ( MFJ ) Taxpayer
Earns ($)	60,000	Per Year as Taxable Income
Tax slab rate as per US Tax law- married - 2019 basis
taxable Income	Tax rate	Calculation
$0-$19401	10%	1,940
$19401-$78950	12%	$1940
		12% on amount over $19401
Earn
$60000	12%
Tax rate
base($)		1,940
Add Tax amount($)
12% ( 60,000-19401)		4,872
Tax amount ($)		6,812	b
TP earn Additional $ 35000 in taxable income
Total Earn($)		95,000
$60,000+$35,000
$78951-$168400	22%	$9086+22% of TI over $ 78950
Earn		95,000
base Tax($)		9,086
Add
Add Tax amount($)		3531
22% ( 95,000-78950)
Tax amount ($)		12,617	a
Margin tax rate		5,805
(a-b)/Earning in 2019		16.59%
Earning in 2019($)		35,000

Following Two Statements are false :

1. Municipal bond interest is subject to explicit federal tax
2. Municipal bonds typically pay a higher interest rate than corporate bonds with similar risk.

Answer 1 why above statement is Not Correct.

As we are aware that Investor always look for Tax free Income and Invest accordingly. Municipal Bonds issue or rather investment in this bonds a popular way to save tax Municipal Bond Interest is absolutely federal tax free

Answer 2-

Municipal Bond Vs Corporate Bond- any Income from Municipal bond in fully taxable where as Corporate Bond income is fully taxable . Municipal Bonds not pay any higher Interest than Corporate Bond . Corporate Bond typically offer higher Yield return . Municipal Bond always carry less risk as compared to Corporate Bond