Question

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The Lindscomb family had the following income in 2015: Salaries: Mark $68,500 Ashley 55,200 Interest on...

The Lindscomb family had the following income in 2015:

Salaries:	Mark	$68,500
	Ashley	55,200

Interest on investments:


IBM bonds		$4,750
New York City bond		1,400
Savings account		2,600

The family made home mortgage payments that included interest of $16,480, and paid real estate (property) tax of $4,320 on their home. They also paid state income tax of $5,860 and donated $1,250 to well-known charities. The Lindscombs have three dependent children. The exemption rate is $4,000 per person. Use Personal Tax Schedules given below.

Single Individuals		Married Couples Filing Jointly
Income ($)	Rate (%)	Income ($)	Rate (%)
0-9,225	10	0-18,450	10
9,225-37,450	15	18,450-74,900	15
37,450-90,750	25	74,900-151,200	25
90,750-189,300	28	151,200-230,450	28
189,300-411,500	33	230,450-411,500	33
411,500-413,200	35	411,500-464,850	35
Over 413,200	39.6	Over 464,850	39.6

Calculate the family's federally taxable income.
$
What is their tax liability assuming they file jointly as a married couple? Round the answer to the nearest cent.
$
What is the average tax rate? Round the answer to 2 decimal places.

What is the marginal tax rate?

Solutions

Expert Solution

Answer a:

Year: 2015

Filing Status: MFJ

Income:

Salaries:

Salaries of Mark = $68,500

Salaries of Ashley = $55,200

Total salaries Income = $68,500 + $55,200 = $123,700

Interest:

IBM Bond = $4,750

Saving Account = $2,600

Interest earned on New York State Bond is tax exempt

Total Interest income = $4,750 + $2,600 = $7,350

Total Income = $123,700 + $7,350 = $131,050

Itemized Deductions:

Home mortgage interest = $16,480

Real estate (property) tax = $4,320

State income tax = $5,860

Donated to well-known charities = $1,250

Total deductions = $16,480 + $4,320 + $5,860 + $1,250 = $27,910

The couple will go for Itemized deduction since the itemized deduction is higher than standard deduction allowable for MFJ = $12,600

Exemption:

Personal exemptions = $4,000 per person * 5 = $20,000

Taxable Income:

Taxable Income = $131,050 - $27,910 - $20,000 = $83,140

Answer b:

Filing Status: MFJ

Taxable Income = $83,140

Tax liability = $18,450 * 10% + ($74,900 - $18,450) * 15% + ($83,140 - $74,900) * 25% = $12,372.50

Tax liability = $12,372.50

Answer c:

Average Tax rate = Tax Liability / Taxable Income = $12,372.50 / $83,140 = 14.88%

Average Tax rate = 14.88%

Marginal Tax rate = 25%

ekkarill92 answered 1 year ago

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