14. What are the highest tax rates for each of the following scenarios? ____. Op
ID: 2403266 • Letter: 1
Question
14. What are the highest tax rates for each of the following scenarios?
____. Operating income from a hotel earned by a foreign corporation (excluding branch profits tax)
____. Interest income earned by a foreign corporation from a US borrower
____. Net rental income earned by an U.S. individual (exclude the passthrough deduction)
____. Capital gain earned by an U.S. individual
____. Interest income earned by a U.S. corporation
____. Capital gain earned by an U.S. corporation
____. Depreciation recapture on the sale of U.S. real estate (Section 1250 property) for an individual
____. Depreciation recapture on the sale of U.S. real estate (Section 1245 property) for an individual
Explanation / Answer
Taxpayers fall into one of seven brackets, depending on their taxable income: 10%, 15%, 25%, 28%, 33%, 35% or 39.6%. Because the U.S. tax system is a progressive one, as income rises, increasingly higher taxes are imposed. But those in the highest bracket don’t pay the highest rate on all their income. For example, for 2017 taxes, single individuals pay 39.6% only on income above $418,401 (above $470,001 for married filing jointly); the lower tax rates are levied at the income brackets below that amount, as shown in the table below.
The table displays tax brackets according to filing status: single, married filing jointly or qualifying widower, head of household and married filing separately. The IRS makes inflation adjustments each year.
Taxpayers fall into one of seven brackets, depending on their taxable income: 10%, 12%, 22%, 24%, 32%, 35% or 37%. Because the U.S. tax system is a progressive one, as income rises, increasingly higher taxes are imposed. But those in the highest bracket don’t pay the highest rate on all their income. For example, in 2018, single individuals pay 37% only on income above $500,000 (above $600,000 for married filing jointly); the lower tax rates are levied at the income brackets below that amount, as shown in the table below.
The table displays tax brackets according to filing status: single, married filing jointly or qualifying widower, head of household and married filing separately. The IRS makes inflation adjustments each year.
Tax rate Married filing jointly or qualifying widow Married filing separately 10% Up to $9,325 Up to $13,350 15% $9,326 to $37,950 $13,351 to $50,800 25% $37,951 to $91,900 $50,801 to $131,200 28% $91,901 to $191,650 $131,201 to $212,500 33% $191,651 to $416,700 $212,501 to $416,700 35% $416,701 to $418,400 $416,701 to $444,550 39.6% $418,401 or more $444,551 or more 10% Up to $18,650 Up to $9,325 15% $18,651 to $75,900 $9,326 to $37,950 25% $75,901 to $153,100 $37,951 to $76,550 28% $153,101 to $233,350 $76,551 to $116,675 33% $233,351 to $416,700 $116,676 to $208,350 35% $416,701 to $470,000 $208,351 to $235,350 39.6% $470,001 or more $235,351 or moreRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.