Question

Chuck ears and What she marri $40,000 of income, what is ed, he had $40.000 of For all requirements de metround medication Schedule X Single If taxable income is over: But not over: The taxi S 0 9.700 10% of table income $ 9,700 394755970s of the excess over 59,700 $ 39,475 S 84200 S4 50 plus 229 of the excess over 539,475 $ 84,200 $160,725 $14. 50 plus 20% of the excess over 584200 160,725 S204.100 32.748 50 plus of the excess over $160,725 $204,100 $510,300 $46.633 50 plus 35% of the excess over 5204,100 SS10.100 $153.795 50 plus 37% of the excess over 5510,300 Schedule Y-1-Married Filing Jointly or Qualifying Widower) If taxable income is over: But not over: The tax is: S 0 S 19.400 10% of the income $ 19,400 S 78.950 1. 90 12 of the excess over $19,400 $ 78,950 $168.400 $9,086 plus 22% of the excess over $78,950 $168.400 5321.450 S28,765 of the excess over $168.400 5321.450 S40N 2006 $400,200 $65,497 plus 32% of the excess over $321,450 $408.200 5612.350 591,257 plus 35% of the excess over $408.200 5612150 $164,709 50 plus of the excess over $612,350 Schedule 2 Head of Household 5612.350 $164,709.50 plus 3796 of the excess over 5612 Schedule Head of Household Ir taxable income is over: But not ever 0 5 13.850 $ 13,850 5 5250 $ 52,850 S 4200 $ 84,200 $160,700 $160,700 S204,100 5204,100 5510300 5510,300 10 of t he income 51.385 plus 129 of the excess over $13.850 56.06S plus 229 of the excess over $52.850 5122962 2 4% of the exces Over $84.200 S31322 32 of the excess over $160,700 $45.210 plus 35% of the excess over 5204.100 $152.350 plus 37% of the excess over $510,300 Schedule Y-2-Married Filling Separately If taxable income is over: But not over The taxis $ 59,7000 of the income $ 9,700 S 39,475 5970 plus 12 of the exces over 59,700 $ 39,475 $ 54,200 $453 plus 22% of the excess over $39,475 $ 84,200 $160,725 $1432 So ples 24% of the excess over $84,200 $160,725 5204,100 $32.74% Soples 32 of the excess over $160,725 5204,100 $306, 175 546 50 plus 35% of the excess over $204,100 5106175 $82,354.75 plus 37% of the excess over 5306,175

The answer is not 19.34% or 17.15%

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Answer 1

(a) Marginal tax rate (b) Marginal tax rate 23.54% 20.88% (a) Calculation of Tax Liability When Taxable Income Tax Liability ($4,543 + ($75,000 - 39,475) X 22% = $ 75,000 $ 12,359 Now assume that Chuck earns additional $40,000 Taxable Income ($75,000 + $40,000) Tax Liability ($14,382.50 + ($115,000 - 84,200) X 24% = $ 1,15,000 $ 21,775 Marginal tax rate = $21,775 - 12,359 $115,000 - 75,000 $ 9,416 40,000 23.54% $ 75,000 (b) Calculation of Tax Liability When Taxable Income Tax Liability ($4,543 + $75,000 - 39,475) X 22% = $ 12,359 Now assume that Chuck has additional $40,000 deductions Taxable Income ($75,000 - $40,000) $ 35,000 Tax Liability ($970 + ($35,000 - 9,700) X 12% = $ 4,006 Marginal tax rate = $12,359 - 4,006 $75,000 - 35,000 = 8,353 40,000 = 20.88%

Individuals Schedule X-Single 0.700 If taxable income is over: But not over: The tax is: $ 0. $ 9,700 10% of taxable income $ 9,700 $ 39,475 $970 plus 12% of the excess over $9,700 $ 39,475 $ 84,200 $4,543 plus 22% of the excess over $39,475 $ 84,200 $160,725 $14,382.50 plus 24% of the excess over $84,200 $160,725 $204,100 $32,748.50 plus 32% of the excess over $160,725 $204,100 S510,300 $46,628.50 plus 35% of the excess over S204,100 $510,300 $153,798.50 plus 37% of the excess over $510,300