Question

The Lindscomb family had the following income in 2012:

Salaries:	Mark	$65,500
	Ashley	52,600

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 the 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 $3,650 per person. Use Personal Tax Schedules given below.

Single Individuals			Married Couples Filing Jointly
Income ($)	Rate (%)		Income ($)	Rate (%)
0-8,700	10		0-17,400	10
8,700-35,350	15		17,400-70,700	15
35,350-85,650	25		70,700-142,700	25
85,650-178,650	28		142,700-217,450	28
178,650-388,350	33		217,450-388,350	33
Over 388,350	35		Over 388,350	35

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?

Answer 1

Answer 1.
Salaries - Mark	65,500.00
Salaries - Ashley	52,600.00	118,100.00
Interest:
IBM Bonds	4,750.00
Savings Account	2,600.00	7,350.00
Total Income		125,450.00
Less: Itemized Deductions
Mortgage Interest	(16,480.00)
Local Tax: Property	(4,320.00)
Local Tax: Tax Income	(5,860.00)
Chartiable Contributions	(1,250.00)
Total Itemized Deduction		(27,910.00)
Personal & Dependency Exemption - $3,650 X 5		(18,250.00)
Taxable Income		79,290.00
Answer 2.
Taxable Income = $79,290
Tax Payable = (17,400 X 10%) + ($70,700 - $17,400) X 15% + ($79,290 - $70,700) X 25%
Tax Payable = $1,740 + $7,995 + $2,147.50
Tax Payable = $11,882.50
Answer 3.
Average Tax Rate = Tax Liability / Taxable Income
Average Tax Rate = $11,882.50 / $79,290
Average Tax Rate = 14.99% (Approx.)
Answer 4.
Marginal Tax Rate = 25% (Bracket Rate)