Question

Jorge and Anita, married taxpayers, earn $150,000 in taxable income and $40,000 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly, 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?

Answer 1

Step-by-step explanation:

Taxable income - 150,000

Federal tax = [28,457.50 +28%*(150,000-146,500)] = 29465.5

Average tax rate = Total tax/Taxable income=29465.5/150,000=19.64%

Effective tax rate = Total tax/Total income

Total income= Taxable income+Income from investment=150,000+40,000=190,000

So, Effective tax rate = 29465.5/190,000=15.51%