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omework Saved Help Save & Exit Submit You received no credit for this question in the previous attempt Check my work View previous attempt Problem 1-35 (LO 1-3) Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. (Use the US. tax rate schedule.) (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income? 27.451 % b. What is his marginal rate if, instead, he had $40,000 of additional deductions? 25.00

Solution

part 1

tax for income upto 75000 = 5226.25 + (25%*(75000-37950)) = 14488.75

tax for income upto 115000 = 18713.75 +(28%*(115000-91900)) = 25181.75

marginal tax rate = (25181.75-14488.75)/(115000-75000) = 26.73%

PART 2

marginal tax rate on deductions would be = 25%