Question

Jorge and Anita, married taxpayers, earn $404,500 in taxable income and $50,000 in interest from an investment in City of Heflin bonds. Using the U.S. tax rate schedule for married filing jointly, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Answer 1

Particulars	Amount ($)	Amount ($)
Taxable income of Jorge and Anita	404,500.00
Interest income from City of Heflin bonds is exempt from tax	-
Taxable income of Jorge and Anita		404,500.00
Married couple filing jointly income up to $18650 @10%	1,865.00
From $18651 to $75900 @15%	8,587.50
From $75901 to $153100 @25%	19,300.00
From $153101 to $233350 @28%	22,469.72
From $233351 to $404500 @33%	56,479.50
Tax liability		108,701.72
Tax liability rounded off		108,702.00
Thus, Jorge and Anita own $108702.00 federal tax.
Their average tax rate (10+15+25+28+33)/5	22.20%
Their effective tax rate (108702 x 100/404500)	26.87%
Current marginal tax rate is 33%