Question

Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. If Marc earned an additional $80,000, what would his 2016 marginal tax rate be on the $80,000 (rounded)? (Tax rate schedule)

Answer 1

Marc's marginal tax rate on an additional $80,000 would depend on the actual 2016 tax brackets. Since his total taxable income would rise to $180,000, and considering the usual progression of tax rates, his marginal tax rate would likely be around the 33% or 35% range, though the exact rate cannot be determined without the specific tax rates for that year.

Step-by-step explanation:

The question pertains to understanding how the marginal tax rate operates within the context of United States federal income tax for a single taxpayer. To determine Marc's marginal tax rate on an additional $80,000 of income, we look at the tax brackets that were in effect for the relevant tax year, which in this case is 2016.

Assuming that the tax rates have not significantly changed since the tax year mentioned in the question, we start with Marc's taxable income of $100,000. The interest from the city of Birmingham Bonds is exempt from federal taxes, so it does not affect the calculation.

If Marc earns another $80,000, his total taxable income would rise to $180,000. If the tax brackets for a single taxpayer in 2016 were similar to those provided in the question, which are: 10% for $0 to $9,075, 15% for $9,075 to $36,900, 25% somewhere above that, his additional income might fall into a higher tax bracket than 25%.