Question

Campbell, a single taxpayer, earns $402,000 in taxable income and $2,040 in interest from an investment in State of New York bonds. (Use the U.S. tax rate schedule). Required: If Campbell earns an additional $15,100 of taxable income, what is her marginal tax rate on this income? What is her marginal rate if, instead, she had $15,100 of additional deductions?

2020 Tax Rate Schedules

Individuals

Schedule X-Single

If taxable income is over:	But not over:	The tax is:
$          0	$    9,875	10% of taxable income
$    9,875	$ 40,125	$987.50 plus 12% of the excess over $9,875
$ 40,125	$ 85,525	$4,617.50 plus 22% of the excess over $40,125
$ 85,525	$163,300	$14,605.50 plus 24% of the excess over $85,525
$163,300	$207,350	$33,271.50 plus 32% of the excess over $163,300
$207,350	$518,400	$47,367.50 plus 35% of the excess over $207,350
$518,400	—	$156,235 plus 37% of the excess over $518,400

Schedule Y-1-Married Filing Jointly or Qualifying Widow(er)

If taxable income is over:	But not over:	The tax is:
$          0	$ 19,750	10% of taxable income
$ 19,750	$ 80,250	$1,975 plus 12% of the excess over $19,750
$ 80,250	$171,050	$9,235 plus 22% of the excess over $80,250
$171,050	$326,600	$29,211 plus 24% of the excess over $171,050
$326,600	$414,700	$66,543 plus 32% of the excess over $326,600
$414,700	$622,050	$94,735 plus 35% of the excess over $414,700
$622,050	—	$167,307.50 plus 37% of the excess over $622,050

Schedule Z-Head of Household

If taxable income is over:	But not over:	The tax is:
$          0	$ 14,100	10% of taxable income
$ 14,100	$ 53,700	$1,410 plus 12% of the excess over $14,100
$ 53,700	$ 85,500	$6,162 plus 22% of the excess over $53,700
$ 85,500	$163,300	$13,158 plus 24% of the excess over $85,500
$163,300	$207,350	$31,830 plus 32% of the excess over $163,300
$207,350	$518,400	$45,926 plus 35% of the excess over $207,350
$518,400	—	$154,793.50 plus 37% of the excess over $518,400

Schedule Y-2-Married Filing Separately

If taxable income is over:	But not over:	The tax is:
$          0	$    9,875	10% of taxable income
$    9,875	$ 40,125	$987.50 plus 12% of the excess over $9,875
$ 40,125	$ 85,525	$4,617.50 plus 22% of the excess over $40,125
$ 85,525	$163,300	$14,605.50 plus 24% of the excess over $85,525
$163,300	$207,350	$33,271.50 plus 32% of the excess over $163,300
$207,350	$311,025	$47,367.50 plus 35% of the excess over $207,350
$311,025	—	$83,653.75 plus 37% of the excess over $311,025

Answer 1

Case 1

Income	$402,000
Interest	$2,040
Additional Taxable Income	$15,100
Total Income	$419,140
Total Deductions	$12,200
Taxable Income	$406,940
Regular Taxes	$121,494	=47367.5+35%*(419140-207350)
Marginal Tax Rate	28.99%	=121494/419140

Case 2

Income	$402,000
Interest	$2,040
Total Income	$404,040
Total Deductions	$12,200
Taxable Income	$391,840
Regular Taxes	$116,209	=47367.5+35%*(404040-207350)
Marginal Tax Rate	28.76%	=116209/404040