Question

6) Heather, a single taxpayer who files as a head of household, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Oxford bonds. Using the U.S. tax rate schedule for year 2019, how much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate? If Heather has an additional $20,000 of tax deductions, what is her marginal tax rate on these deductions? (Round the tax rates to two decimal places, e.g., .12345 as 12.35 percent.) (Use tax rate schedule).

Answer 1

Heather:

Calculation of Federal tax that heather will owe on taxable income of $60,000 for the year 2019 is:

= 1,335+5,617.50+25%*(60,000-50,800)

= 9,252.50

Calculation of Average tax rate = Tax/taxable income

= 9,252.50/60,000

= 15.42%

Marginal tax rate = Tax/Total income

= 9,252.50/65,000

= 14.23%

Calculation Federal tax that heather will owe on taxable income of $40,000 for the year 2019 is:

= 1,335+15%*(40,000-13,350)

= 5,332.50

Marginal tax rate = 15%.