Question

Jorge and Anita, married taxpayers, earn $142,000 in taxable income and $49,000 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 $104,500 of taxable income, what is their marginal tax rate on this income

Answer 1

Jorge and Anita

Their marginal tax rate on their income is 24%.

Step-by-step explanation:

a) Data and Calculations:

Taxable income = $142,000

Interest from municipal bonds = $49,000

Additional taxable income = $104,500

Total taxable income:

Taxable income = $142,000

Additional taxable income = $104,500

Total = $246,500

Their joint income is within the $165,601 - $315,000 band, which attracts 24% marginal tax rate.

b) Note that income from investing in municipal bonds is generally exempt from Federal and state taxes, especially for residents of the issuing state, except capital gains attributed to the investment.