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Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places)...

Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the tax tables to determine tax liability.

  1. Married taxpayers, taxable income of $38,862:
    Liability = _________ Marginal = _________ Average = _________

  2. Single taxpayer, taxable income of $61,229:
    Liability = _________ Marginal = _________ Average = _________

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Answer #1

a) The marginal tax rate for married taxpayers filing jointly having taxable income $38,862 (i.e. from $19,751 to $80,250) is 12%.  

Tax Liability = ($19,750*10%)+[($38,862-$19,750)*12%]

= $1,975+$2,293.44 = $4,268.44

Therefore the total tax liability is $4,268.

Marginal tax rate = 12%

Average tax rate = (Total Tax liability/Taxable income)*100

= ($4,268/$38,862)*100 = 10.98%

b) The marginal tax rate for single taxpayers having taxable income $61,229 (i.e. from $40,126 to $85,525) is 22%.  

Tax Liability = ($9,875*10%)+[($40,125-$9,875)*12%]+[($61,229-$40,125)*22%]

= $987.50+$3,630+$4,642.88 = $9,260.38

Therefore the total tax liability is $9,260.

Marginal tax rate = 22%

Average tax rate = (Total Tax liability/Taxable income)*100

= ($9,260/$61,229)*100 = 15.12%

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