Question

Campbell, a single taxpayer, earns $400,000 in taxable income and $2,000 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule). Required: a. If Campbell earns an additional $15,000 of taxable income, what is her marginal tax rate on this income? b. What is her marginal rate if, instead, she had $15,000 of additional deductions? (For all requirements, do not round intermediate calculations Chdpter 1Homewor3 Saved Save &Exit Help Check r Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40.000 in interest from an investment in City of Heflin bonds Using the US tax.rate schedule for marrmied fang 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? (Round your answers to 2 decimal oleces 4 29 4

Answer 1

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Answer is highlighted in yellow: Campbell: Single: Both are individual questions, although both are answer exceptionally: Solution: Answer a) 35.00% Explanation: Change in Tax / Change in Taxable income Marginal tax rate (45689.50) (400000-200000) 35% $1,15,689.50 Tax on Old income $1,20,939.50 $ 5,250.00 $15,000.00 Tax on New income (45689.50) (415000-200000)*35% = Change in Tax Change in Taxable income Marginal Tax Rate 35.00% Answer b) Explanation: 35.00% Change in Tax / Change in Taxable income Marginal tax rate Tax on Old income (45689.50) +(400000-200000)*35% Tax on New income (45689.50) (385000-200000) 35% $1,15,689.50 $1,10,439.50 Change in Tax -5 ,00 $-15.000.00 Change in Taxable income Marginal Tax Rate 35.00%

2) As per 2018 Tax rate schedule: Married Filing jointly Answers are high lighted in yellow: In this case, $40000 interest income is tax exempt as per IRS, therefore, tax will be calculated on $150000 only: (8907)+150000-77400) 22 % = $ 24,879 a) Federal tax: (24879)/(1500000) b) 16.59% Average tax rate (24879)/(150000+40000) = c) Effective tax rate 13.09% d) Current Marginal tax rate (the last applicable rate in slab) 22%