Question

3-Leonardo, who is married but files separately, earns $220,000 of taxable income. He also has $18,500 in city of Tulsa bonds. His wife, Theresa, earns $57,000 of taxable income. If Leonardo earned an additional $73,000 of taxable income this year, what would be the marginal tax rate on the extra income for year 2018? (Use tax rate schedules) a-37.17% b-29.98 c-35.17 d-35

Answer 1

Here Answer is d 35%

If Leonardo earned an additional $73,000 of taxable income this year, the marginal tax rate on the extra income for year 2018 will be 35%

this is calculated as following

Leonardo Total Income = S 220000+$18500 =$238500

As City of Tulsa bonds is exempt so

Taxable Income = $238500-$18500 =$220000

Standard deduction for 2018 if filling separately = $12000

Taxable income = $220000-$12000

= $208000

Income Tax liability = $45689.50+35% of excess over $200000(tax brackets taken from following table given at the end)

=$45689+$2800= $48489

If Leonardo earns extra $73000

Taxable income = $281000

Income Tax liability = $45689.50+35% of excess over $200000(tax brackets taken from following table given at the end)

=$45689+$28350= $74039

So Marginal Tax = (New tax - old tax)*100/(New taxable income-Old taxable income)

= ($74039-$48489)/($281000-$208000)*100

= $2550*100/$73000

= 35%

Table 1. Married filling single

If Taxable Income Is:	Then Income Tax Equals:
Not over $9,525	10% of taxable income
Over $9,525 but not over $38,700	$952.50 plus 12% of the excess over $38,700
Over $38,700 but not over $82,500	$4,453.50 plus 22% of the excess over $82,500
Over $82,500 but not over $157,500	$14,089.50 plus 34% of the excess over $157,500
Over $157,500 but not over $200,000	$32,089.50 plus 32% of the excess over $200,000
Over $200,000 but not over $300,000	$45,689.50 plus 35% of the excess over $200,000
Over $300,000	$80,689.50 plus 37% of the excess over $300,000

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