Question

Jill and George are married and file a joint return. They expect to have $410,000 of taxable income in the next year and are considering whether to purchase a personal residence that would provide additional tax deductions of $80.000 for mortgage interest and real estate taxes.

Not over $17,850.............. 10% of taxable income.
Over $17,850 but not over $72,500 $1,78500 + 15% of the excess over $17,850.
Over $72,500 but not over $146,400 $9,982.50 + 25% of the excess over $72,500.
Over $146,400 but not over $223,050..... $28,45780 + of the excess over $146,400.
Over $223,050 but not over $398,350..... S49,919S0 + of the excess over $223,050.
Over $398,350 but not over $450,000..... $107,76840 + of the excess over $398,350.
Over $450,000..................... $125,846ff + 39.6 of the excess over $450,000.

Required:
a. What is their marginal tax rate for purposes of making this decision?
b. What is the tax savings if the residence is acquired?

Answer 1

a. What is their marginal tax rate for purposes of making this decision?

the %s are missing, so I looked for a similar question.

Since their income is between $398,350 and $450,000, their marginal tax rate is 35%

b. What is the tax savings if the residence is acquired?

if they buy their home, they could save up to $80,000 x 35% = $28,000 in taxes

Step-by-step explanation:

Tax schedules are progressive, meaning that taxpayers that earn higher income will pay higher marginal tax rates.