What would be the marginal and average tax rates for a married couple with taxab

Question

What would be the marginal and average tax rates for a married couple with taxable income of $90,400? For an unmarried taxpayer with the same income? Use Table 3.7. (Do not round intermediate calculations. Enter the marginal tax rate as a percent rounded to 1 decimal place. Enter the average tax rate as a percent rounded to 1 decimal place.)

a. What would be the marginal tax rate for a married couple with income of $90,400?

b. What would be the average tax rate for a married couple with income of $90,400?

c. What would be the marginal tax rate for an unmarried taxpayer with income of $90,400?

d. What would be the average tax rate for an unmarried taxpayer with income of $90,400?

TABLE 3.7 Personal tax rates, 2016 Taxable Income ($) Single Taxpayers Married Taxpayers Filing Joint Returns Tax Rate (%) 10.0 15.0 25.0 28.0 33.0 35.0 39.6 0-9,275 0-18,550 9,276-37,650 37,651-91,150 91,151-190,150 190,151-413,350 413,351-415,050 415,051 and above 18,551-75,300 75,301-151,900 151,901-231,450 231,451-413,350 413,351-466,950 466,951 and above 4 Losses can be carried back for a maximum of 3 years and forward for up to 15 years

Explanation / Answer

Marginal tax rate is the tax rate applicable for additional taxable income.

a

Married couple with taxable income of $90,400 are in 25% tax bracket, thus, marginal tax rate applicable for them is 25%.

b

Average tax rate = Tax payable/ taxable income * 100

Tax payable for taxable income of $90,400 is 10367.50 plus 25% * (90,400 - $75,300) = 14142.50

Average tax rate = 14142.50 / 90400 * 100 = 15.644%

c

Marginal tax rate is the same as 25%

d

Tax payable on 90400 is 5183.75 plus 25% * (90400 - 37650) = 18371.25

Average tax rate = 18371.25/90400 = 20.322%

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