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Scot and Vidia, married taxpayers, earn $69,500 in taxable income and $5,000 in interest from an...

Scot and Vidia, married taxpayers, earn $69,500 in taxable income and $5,000 in interest from an investment in City of Tampa bonds. (Use the U.S. tax rate schedule for married filing jointly). Required: If Scot and Vidia earn an additional $31,500 of taxable income, what is their marginal tax rate on this income? What is their marginal rate if, instead, they report an additional $31,500 in deductions?

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Answer #1

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Marginal tax rate = Change in Tax / Change in Taxable income

As per 2018, tax schedule: Married Filing Jointly: Solution: 19.49% Answer a] Explanation: Marginal tax rate Change in Tax/ Change in Taxable income Tax on old income (1905) + (69500-19050)*12% Tax on New income Change in Tax Change in Taxable income Marginal Tax Rate $ 7,959.00 $14,099.00 $ 6,140.00 $ 31,500.00 19.49% +/ 101000-77400) * 22% Answer b) Explanation: 12.00% Marginal tax rateChange in Tax/ Change in Taxable income Tax on old income (1905) + (69500-19050)*12% Tax on New income (1905) + (38000-19050)*12% Change in Tax Change in Taxable income Marginal Tax Rate $ 7,959.00 $ 4,179.00 $ -3,780.00 $-31,500.00 12.00%

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