Chuck a single taxpayer earns 80750 in taxable income and 30

Chuck, a single taxpayer, earns $80,750 in taxable income and $30,750 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. If Chuck earns an additional $64,500 of taxable income, what is his marginal tax rate on this income? Marginal tax rate b. What is his marginal rate if, instead, he had $64,500 of additional deductions? Marginal tax rate

Solution

Tax on $80750 = 5226.25+(80750-37950)*0.25= 15926.25 a Taxable income = 80750+64500= 145250 Tax on $145250 = 18713.75+(145250-91900)*0.28= 33651.75 Marginal tax rate = (33651.75-15926.25)/(145250-80750)= 27.48% b Taxable income = 80750-64500= 16250 Tax on $16250 =932.5+(16250-9325)*0.15= 1971.25 Marginal tax rate = (15926.25-1971.75)/(80750-16250)= 21.63%