In 2019, Rory earns $74,000 per year as a college professor, paying $6,771 in federal income...
In 2019, Rory earns $74,000 per year as a college professor, paying $6,771 in federal income taxes. Latesia is a marketing executive with a salary of $144,000 who paid $22,879 in federal taxes. In addition, Latesia collected $100,000 on a life insurance policy. Both taxpayers are single and take the 2019 standard deduction.
Compute the following for the two taxpayers.
Note: Round the total taxes to two decimal places. Enter percentages to one decimal.
a. With respect to the Social Security tax, calculate their total FICA liability.
Hint: OASDI: 6.2% with a cap of $132,900; MHI: 1.45%
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Click here to view the 2019 Tax Rate Schedules (for single taxpayers).
b. Based on the data provided, compute Rory and Latesia's marginal tax rate for 2019.
|
c. Based on the data provided, compute Rory and Latesia's average tax rate for 2019.
|
d. Based on the data provided, compute Rory and Latesia's effective tax rate for 2019.
|
Homework Answers
| a. Total FICA liability. | ||
| Hint: OASDI: 6.2% with a cap of $132,900; MHI: 1.45% | ||
| Rory's total FICA taxes:(74000*(6.2%+1.45%)) | 5661 | |
| Latesia's total FICA taxes:(132900*6.2%)+(144000+100000)*1.45% | 11777.80 | |
| b. Based on the data provided, Rory and Latesia's marginal tax rate for 2019. | ||
| Rory's marginal tax rate:Taxable income =74000-std. deduction for single tax payers, 12200=61800 falls in | 22% | tax bracket, ie. Taxable income > $ 39475 < $ 84200 |
| Latesia's marginal tax rate:(144000+100000)=244000-12200=231800 falls in | 35% | tax bracket, ie. Taxable income > $ 204100 < $ 510300 |
| c. Based on the data provided, Rory and Latesia's average tax rate for 2019. | ||
| Rory's average tax rate: Av. Of diff. tax brackets ,ie. (10%+12%+22%)/3= | 14.7% | |
| Latesia's average tax rate:(10%+12%+22%+24%+32%+35%)/6= | 22.5% | |
| d. Based on the data provided, Rory and Latesia's effective tax rate for 2019. | ||
| Rory's effective tax rate:Actual tax expense/Total income,ie.6771/74000= | 9.2% | |
| Latesia's effective tax rate:22879/244000= | 9.4% |
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