Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 i

Question

Fred and Wilma, married taxpayers, earn $100,000 in taxable income and $20,000 in interest from an investment in city of Bedrock Bonds. Using the U.S. tax rate schedule for married filing jointly for year 2017, 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? If Fred and Wilma earn an additional $40,000 of taxable income, what is their marginal tax rate on this income? (Round the tax rates to 2 decimal places, e.g., 12345 as 12.35%) (Use taxrateschedule)

Explanation / Answer

Computation of Tax for Fred & Wilma, Married filling Jointly Taxable Income for 2017 $100,000 Calculation of Tax $16,477 ($10452+($100000-$75900)*25% Hence , Federal Tax for 2017 will be $16477 Computation of Average Tax Rate Taxable Income for 2017 $100,000 Tax. $16,477 Average Tax Rate ($16477/$100000*100) 16.48% Computation of Effective Tax Rate Total income ( $100000+20000) $120,000 Tax. $16,477 Average Tax Rate ($16477/$120000*100) 13.73% Marginal Tax Rate 25% Computation of Tax ( $40000 additional Income) Taxable Income for 2017 $140,000 Calculation of Tax $26,477 ($10452+($140000-$75900)*25% Marginal Tax Rate will be =25%

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