Question

Jorge and Anita, married taxpayers, earn $185,500 in taxable income and $45,000 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

Answer

a)Federal Tax
Taxable Income	$185,000
Taxable Income	Tax Rate
$151,201 to $230,450	$29,387.50 plus 28% of the amount over $151,200
Tax = $29387.50 + 28% x ($185000 - $151,200)	$38,851.5
Jorge and Anita will owe $38,851.50 in federal income tax .
b) Average Tax Rate = Total Tax/ Taxable Income
Average tax rate = $38,851.50/185000	21.00%
c) Effective Tax Rate = Total Tax/Total Income
Effective Tax Rate = $38,851.50/($185,000 + $20000)	18.95%
d)
Current marginal tax rate	28.00%
Jorge and Anita are currently in the 28 % tax rate bracket. Their marginal tax rate on increases in income up to (230450-185000= $45450 and deductions up to($185000 - 151200= $33,800 is 28 percent