Alan and Sara Winthrop are a married couple who file a joint income tax return.

Question

Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, so they claim a total of 4 exemptions. In addition, they have legitimate itemized deductions totaling $25,750. Their total income from wages is $216,500. Assume the following tax table is applicable: Married Couples Filing Joint Returns If Your Taxable You Pay This Amount on the Base of the Bracket Plus This Percentage on the Excess over the Base Average Tax Rate at Top of Bracket Up to $18,450 $ 0 10.0% 10.0% $18,450-$74,900 1,845.00 15.0 13.8 $74,900-$151, 200 10,312.50 25.0 19.4 $151, 200-$230,450 29,387.50 28.0 22.4 $230,450-$411,500 51,577.50 33.0 27.1 $411,500-$464,850 111,324.00 35.0 28.0 Over $464,850 129,996.50 39.6 39.6 What is their average tax rate? 18.94% 16.68% 17.71% 19.15% 20.59%

Explanation / Answer

Total Income of Wages=$216,500

Deductions=$25,750

so Taxable income=$216,500-$25,750=`$190,750

Calculation tax if Taxble income is $190,750

So average rate of tax=$39,275/$190,750=0.2059=20.59%

Taxble income Rate of tax Tax Up to $18,450 10%      1,845.00 $18,450-$74,900 15%      8,467.50 $74,900-$190,750 25% 28,962.50 39,275.00

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