Jorge and Anita married taxpayers earn 90400 in taxable inco

Jorge and Anita, married taxpayers, earn $90,400 in taxable income and $55,000 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? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Federal tax Average tax rate Effective tax rate Marginal tax rate 25 001%

Solution

Using Federal Tax Rates 2017 Taxable Income = $90,400 Tax Payable = $10,452.50 + 25% X ($90,400 - $75,900) Tax Payable = $10,452.50 + $3,625 Tax Payable = $14,077.50 Average Tax Rate = Total Tax / Taxable Income Average Tax Rate = $14,077.50 / $90,400 Average Tax Rate = 15.57% (Approx.) Effective Tax Rate = Total Tax / Total Income Effective Tax Rate = $14,077.50 / ($90,400 + $55,000) Effective Tax Rate = 9.68% (Approx.) Marginal Tax Rate = 25%