Question

orge and Anita, married taxpayers, earn $146,500 in taxable income and $58,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule for married filing jointly). Required: If Jorge and Anita earn an additional $109,000 of taxable income, what is their marginal tax rate on this income

Answer 1

Currently (assuming a 2020 tax schedule), Jorge and Anita's tax liability = $9,235 + [22% x ($146,500 - $80,250)] = $23,810

municipal bonds are not taxed by the federal government, so they do not pay any taxes on the interests earned on the City of Heflin bonds.

if they earn an additional $109,000, then their tax liability will be:

$29,211 + [24% x ($255,500 - $171,050)] = $49,479

their marginal tax rate = 24%