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Chuck, a single taxpayer, earns $15,750 in taxable income and $2,500 in interest from an...

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Chuck, a single taxpayer, earns $15,750 in taxable income and $2,500 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) (Do not round intermediate calculations. Round your answers to 2 decimal places.)

a. If Chuck earns an additional $5,000 of taxable income, what is his marginal tax rate on this income?

b. What is his marginal rate if, instead, he had $5,000 of additional deductions?

Campbell, a single taxpayer, earns $404,500 in taxable income and $8,500 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule.) (Do not round intermediate calculations. Round "Federal tax" to 2 decimal places.)

a. How much federal tax will she owe?

b. What is her average tax rate?

c. What is her effective tax rate?

d. What is her current marginal tax rate?

Jorge and Anita, married taxpayers, earn $406,000 in taxable income and $67,500 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.)

1) federal taxes

2) average tax rate %

3) effective rate %

4) marginal tax rate %

Marginal tax rate:

The marginal tax rate refers to the rate that is applied to the income of every individual for each qualified bracket. These kinds of tax rate are in the form of percentage such as 10%,15%, 25%.

Answer and Explanation:

Single
Income Long Term Capital Gains and Qualified Dividend Taxable Income
10% 0% $0 $9,225
15% 0% $9,225 $37,450
25% 15% $37,450 $90,750

1)

a)

Earning amount = $ 15750

Additional Income = $ 5000

Total taxable Income = Earning amount +Additional Income

= $ 15750+$5000

= $ 20750

Amount $ 20750 come under the tax bracket 15%

Marginal Tax rate = 15%

Interest from an Investment

Earning amount = $ 15750

Less: Taxable Income = $ 9225

= $ 6525

Tax Amount ($ 6525*0.15) = $ 978.75

Total Taxable amount = ($978.75+$922.5)

= $1901.25

b)

Calculation of marginal rate

Earning amount = $ 15750

Additional amount of deuction = $5000

Total taxable amount = $15750-5000

=$ 10750

The total taxable amount $ 10750 will come under tax bracket 15%

Interest from an investment

Earning Amount - Taxable income

$15750-$9225

= $6525

Tax Amount = ($6525*0.15)

=$978.75

Hence,

Total tax amount = ($ 978.75+$ 922.50)

=$1901.25

2)

a) _Campbell Federal Tax liability_ = 117944

So,

b) Average tax rate_ = 117944 / 404500

= 29.16%

c) _Effective tax rate_ = 117944 / (404500+8500) *100

= 28.56%

d) _Current Marginal Tax rate_ = 39.6%

3)

a) _Calculation of federal tax rate. _

Slabs Tax Rate Amount
18150 10.00% 1815
55650 15.00% 8347.5
75050 25% $18,763
78000 28% $21,840
178250 33% $58,822
900 35% $315
40600 $109,903

b) _Calculation of average tax rate_

Particular Amount
Tax Liability 109902.5
Gross Taxable Income 406000
Average tax rate 27.07%

c) _Calculation of effective tax rate

Particulars Amount
Tax Liability 109902.5
Total Income 473500
Effective tax rate 23.21%

d) The current marginal tax rate is not applicable for calculating the tax amount over a particular period. The current marginal tax rate is 35%.


Learn more about this topic:

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