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Jorge and Anita, married taxpayers, earn $185,500 in taxable income and $45,000 in interest from an...

Jorge and Anita, married taxpayers, earn $185,500 in taxable income and $45,000 in interest from an investment in City of Heflin bonds. Using the 2020 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?

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Answer #1

Calculation of Federal Tax

Taxable income $185500

Tax on above income using slab rates applicable

=$1975+7260+19976+24%(185500-171051)

=$ 1975+7260+19976+  3468 =$32679

Average tax rate = total tax/ total taxable income = $32679/$185500 = 17.62%

Effective tax rate = total tax / total income

=$32679/ $230500 = $14.18%

Marginal tax rate

Currently they are in 24% slab rate .marginal tax rate is 24%

Note interest from investment in bonds is exempt income .

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