Fred and Wilma, married taxpayers, earn $105,000 in taxable income and $20,000 i

Question

Fred and Wilma, married taxpayers, earn $105,000 in taxable income and $20,000 in interest from an investment in City of Bedrock Bonds. Using the U.S. tax rate schedule for married filing jointly for year 2017, how much is their taxable income and 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? If Fred and Wilma earn an additional $60,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%)

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Explanation / Answer

Fred and Wilma, married taxpayers, earn $105,000 in taxable income in year 2017

10452.5+25%(105,000-75,900)=17727.5

Average tax rate = Tax liability / Taxable income = $17727.5/$105,000 = 0.16883333333 = 16.83%

Effective tax rate = Tax liability / Total income = $17727.5/($105,000 + $20,000) = 0.14182 = 14.18%

Marginal rate =25%

fedral tax Fred and Wilma earn an additional $60,000 of taxable income

29752.50+28%(165000-153100)

$33084.5

marginal rate =28%

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