Question

Marc, a head of household, has AGI of $60,000 and $5,000 in interest from an investment in City of Birmingham bonds. Using the U.S. tax rate schedule for 2019, what is Marc’s average tax rate (rounded) and marginal tax rate on $100 of additional taxable interest and $100 of capital gain, respcctively?

Multiple Choice

• 11.5%; 12%; 0%

• 12%; 12%; 12%.

• 11.5%; 12%; 12%.

• 12%; 12%; 15%

Answer 1

Gross income = $60000

Less: Standard Deduction $18350

Taxable Income = $41650

Calculation of Tax liability:

Upto 13850	10%	$1385
$27800 (41650 - 13850)	12%	$3336
Total : $41650		$4721

Average tax rate = $4721 / $41650 = $11.33% pr 11.5%.

Marginal tax rate = $12% ( As per US Tax Rate Schedule 2019 for head of household $13851 - $52850)

Corresponding rate for capital gain = 0% (As per US Tax Rate Schedule 2019 for head of household upto $52750)

Thus the answer is 11.5% ;12% ;0%

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