Question

Exercise 3-20 (Algorithmic) (LO. 6)

Compute the 2018 Federal income tax liability and the marginal and effective tax rates in each of the following independent cases.

Click here to access the 2018 tax rate schedule. If required, round the tax liability the nearest dollar. When required, round the average rates to four decimal places before converting to a percentage (i.e. .67073 would be rounded to .6707 and entered as 67.07%).

a. Chandler is single and reports taxable income of $104,200.

Tax liability:	$
Marginal rate:		%
Average rate:		%

b. Lamar, a head of household, records taxable income of $53,000.

Tax liability:	$
Marginal rate:		%
Average rate:		%

Answer 1

Solution:

a. Chandler is single and reports taxable income of $104,200.

Chandler's tax liability will be [$14,382.50 + 24% * ($104,200 - $84,200)]

Chandler's tax liability = $19,182.50

So,

Tax liability:	$19,182.50
Marginal rate:		24%
Average rate: ($19,182.50 / $104,200) *100		18.41%

b. Lamar, a head of household, records taxable income of $53,000.

Lamar's tax liability will be [$6,065 + 22%($53,000 - $52,850)

Lamar's tax liability = $6,098

So,

Tax liability:	$6,098
Marginal rate:		22%
Average rate: ($6,098 / $53,000) * 100		11.50%