Question

Leonardo, who is married but files separately, earns $190,000 of taxable income. He also has $16,250 in city of Tulsa bonds. His wife, Theresa, earns $70,000 of taxable income. If Leonardo and his wife file married filing jointly in 2018, what would be their effect tax rate (rounded)? (Use tax rate schedule)

Answer 1

If Leonardo and his wife file married filing jointly in 2018, what would be their effect tax rate = 16.37%

this is calculated as following

Leonardo Total Income = S 190000+$16250 =$206250

Theresa income = $70000

Gross Total income of Leonardo and Theresa = $206250+$70000 = $276250

As City of Tulsa bonds is exempt

so

Taxable Income = $276250-$16250 =$260000

Standard deduction for 2018 if filling jointly = $24000

Taxable income = $260000-$24000

= $236000

Income Tax liability = $28179+24% of excess over $165000 (tax brackets taken from following table given at the end)

= $28179+24% ($236000-$165000)

= $28179+$24% of $71000

= $28179+$17040

= $45219

so effective tax rate = Total Tax*100/Gross total income

= $45219*100/276250

= 16.37% rounded off to two decimals

Table 1. Married Filing Jointly and Surviving Spouses

Taxable Income	Taxes
Up to $19,050	10% of taxable income
Over $19,050 but not over $77,400	$1,905 plus 12% of excess over $19,050
Over $77,400 but not over $165,000	$8,907 plus 22% of the excess over $77,400
Over $165,000 but not over $315,000	$28,179 plus 24% of the excess over $165,000
Over $315,000 but not over $400,000	$64,179 plus 32% of the excess over $315,000
Over $400,000 but not over $600,000	$91,379 plus 35% of the excess over $400,000
Over $600,000	$161,379 plus 37% of the excess over $600,000

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