Federal tax using 2018 tax rate schedules Thanks Chuck, a single taxpayer, earns
ID: 2329738 • Letter: F
Question
Federal tax using 2018 tax rate schedulesThanks Chuck, a single taxpayer, earns $84,500 in taxable income and $23,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule) Required: a. If Chuck earns an additional $56,000 of taxable income, what is his marginal tax rate on this income? b. What is his marginal rate if, instead, he had $56,000 of additional deductions? (For all requirements, do not round intermediate calculations. Round your answers to 2 decimal places.) a. Marginal tax rate b Marginal tax rate
Explanation / Answer
(a) If Chuck earns additional $56000 taxable Income:-
Marginal Tax Rate = Change in Tax / Change in Taxable Income
Tax Before additional Income :-
14089.50 + 24%(84500 – 82500)
= $14569.50
Tax after additional Income :-
Total Income = 84500 + 56000 = $140500
Tax = 14089.50 + 24%(140500 – 82500)
= $28009.50
Marginal Tax Rate = (28009.5 – 14569.50) / (140500 – 84500)
= 24%
(b) If additional deduction is $56000 instead of additional income:-
Marginal Tax Rate = Change in Tax / Change in Taxable Income
Tax Before additional deduction :-
14089.50 + 24%(84500 – 82500)
= $14569.50
Tax after additional deduction :-
Income after deduction = 84500 – 56000 = $28500
Tax = 952.5 + 12%(28500 – 9525)
= 3229.50
Marginal Tax Rate = (3229.5 – 14569.50) / (28500 – 84500)
= 20.25%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.