Jorge and Anita Married taxpayers earn 150000 in taxable inc

Jorge and Anita, Married taxpayers, earn $150,000 in taxable income and $40,000 in interest form an investment in CIty of Heflin bonds. IF Jorge and Anita earn an additional $100,00 of taxable income, what is their marginal tax rate on this income? 28.74% What is their marginal rate if, instead, they report an additional $1000,000 in deductions?

Solution

Tax on $150000=10452.5+(150000-75900)*0.25= 28977.5 a Taxable income = 150000+100000 = $250000 Tax on $250000=52222.5+(250000-233350)*0.33= 57717 Marginal tax rate=(57717-28977.5)/100000= 28.74% b Taxable income = 150000-100000 = $50000 Tax on $50000=1865+(50000-18650)*0.15= 6567.5 Marginal tax rate=(28977.5-6567.5)/100000= 22.41%