Question

Leonardo, who is married but files separately, earns $90,000 of taxable income. He also has $8,750 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. What is Leonardo and Theresa's effective tax rate for year 2018 (rounded)? (Use tax rate schedule)

Answer 1

Answer: 17.56%

Step-by-step explanation:

Given that,

Leonardo taxable income = $90,000

Tulsa bonds = $8,750

Theresa taxable income = $50,000

Computation of Leonardo's Tax:

According to the tax rate schedule,

Total Tax = Tax + 24% of taxable income over $82,500

= $14,089.50 + 24% × $7,500

= $14,089.50 + $1,800

= $15,889.5

Computation of Theresa's Tax:

According to the tax rate schedule,

Total Tax = Tax + 22% of taxable income over $38,700

= $4453.50 + 22% × $11,300

= $4453.50 + $2,486

= $6939.5

Total tax on Leonardo's income and Theresa's income:

= $15,889.5 + $6939.5

= $22,829

Effective tax rate =
`(Total\ Tax)/(Total\ Taxable\ Income)*100`

=
`(22,829)/(130,000)*100`

= 17.56%