Question

1. Bob and Bianca, married taxpayers, earn $95,000 in taxable income and $20,000 in interest from an investment in city of Bubble Bonds. Using the U.S. tax rate schedule for year 2020, what is their tax liability? Calculate tax liability using the 2020 federal tax rate schedules. What is their average tax rate? What is their effective tax rate? If Bob and Bianca earn an additional $40,000 of taxable income, what would be their marginal tax rate on this income? [Round the tax rates to 2 decimal places, e.g. 12.35%] (worth 12.5 points)

Answer 1

As federal taxes 2020
Tax rate	Married filing jointly or qualifying widow	Tax	Calculation
10%	$0 to $19,750	1975	19750*10%
12%	$19,751 to $80,250	7260	=(80250-19750)*12%
22%	$80,251 to $171,050	3245	=(95000-80250)*22%
		12480
Total tax	12480
Marginal tax rate	22%
average tax rate	13.14%	(12480/95000)
effective tax rate	10.85%	(12480/(95000+20000))
His marginal tax rate will remain 22% if he earn an additional income of $40000