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?

Answer 1

Jorge and Anita will owe $30,069.50 in federal income tax this year computed as follows:

$30,069.50 = $27,087.50 + 28 % ($150,000 − $139,350).

Jorge and Anita’s average tax rate is 20.05 percent.

Average Tax Rate = Total Tax/Taxable Income

Average Tax Rate = $30,069.50 / $150,000 = 20.05%

Jorge and Anita’s effective tax rate is 15.83 percent.

Effective tax rate = Total Tax / Total Income

Effective tax rate = $30069.50 / ($150,000 + $40,000) = 15.83%

Jorge and Anita are currently in the 28 percent tax rate bracket. Their marginal tax rate on increases in income up to $62,300 and deductions up to $10,650 is 28 percent