Question

Assume that Sara (not married, not a dependent) has taxable income of 80,000 which includes 10,000 of long-term capital gains. Sara also had interest from a tax-exempt source of $20,000

a) Sara tax liability is

b) Sara marginal tax rate is

c) Sara average tax rate is

d) Sara effective tax rate is

Answer 1

a	Total tax liability
	=1500+11190
	12690
	Marginal tax rate	= change in tax paid/change in income
	Let assume change of 1 dollar	=+(12690.22-12690)/1
		=0.22/1
		0.22
	Assuming no change in LTCG
	Averge tax rate	=total tax expense/total taxable income
		=12690/80000
		0.158625
	Effective tax rate	= Total tax expense/net income
		=12690/100000
		0.1269

Long term capital Gain	10000
Other taxable income	70000
Long term capital gain tax
income between 0-40000	15%
Income tax expense	1500
Tax on other taxable income		income 70000	income70001
Income	tax rate	amount
0-9875	10%	987.5	987.5
9876-40125	12%	3630	3630
40125-85525	22%	6572.5	6572.72
		11190	11190.22