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2 years ago

6

Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. (U

se the U.S tax rate schedule..) (Do not round intermediate calculations. Round "Federal tax" to 2 decimal places.)a. How much federal tax will he owe?b. What is his average tax rate?c. What is his effective tax rate?d. What is his current marginal tax rate?

1 answer:

Andrew [12]2 years ago

6 0

Answer:

Given that,

Taxable income = $75,000

Interest from an investment = $10,000

Using the U.S tax rate schedule in 2017

(a) Federal tax will he owe = $5,226.25 + 25% × ($75,000 - $37,950)

= $5,226.25 + $9262.5

= $14,488.75

(b) $Average\ Tax\ Rate = \frac{Total\ Tax}{Taxable\ Income}$

$Average\ Tax\ Rate = \frac{14,488.75}{75,000}$

= 19.32%.

(c) $Effective\ Tax\ Rate = \frac{Total\ Tax}{Total\ Income}$

$Effective\ Tax\ Rate = \frac{14,488.75}{75,000 + 10,000}$

= 17.05%

(d) Chuck is currently in the 25 percent tax rate bracket.

His marginal tax rate on increases in income up to $16,900 and deductions from income up to $37,050 is 25 percent.

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