34. Chuck, a single taxpayer, earns $75,000 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. Using the U.S tax rate schedule (see Appendix C). How much federal tax will he owe? What is his average tax rate? What is his effective tax rate? What is his current marginal

tax rate?

1. Federal Tax

= $4,664 + 22% ($75,000 - $40,525)

= $4,664 + $7,584.50

=$12,248.50

2. Average Tax Rate

Total Tax / Taxable Income

= $12,248.50 / $75,000

=16.33%

3.Effective Tax Rate

Total Tax / Total Income

=$12,248.59 / ($75,000+$10,000)

=14.41%

His marginal tax rate is 22%

35. Using the facts in the previous problem, if Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income? What is his marginal rate if, instead, he had $40,000 of additional deductions?

2021 Tax Rate Schedules Individuals Schedule X-Single Schedule Z-Head of Household If taxable If taxable income is But not income is But not wer: over: The tax is: over: over: The tax is: 0 $ 9.950 10% of taxable income S $ 14,200 10% of taxable income $ 9,950 $ 40.525 $995 plus 12% of the excess $ 14,200 $ 54,200 $1,420 plus 12% of the excess over $9,950 over $14,200 $ 40,525 $ 86,375 $4,664 plus 22% of the excess $ 54,200 $ 86,350 $6,220 plus 22% of the excess over $40,525 over $54,200 $ 86,375 $164,925 $14,751 plus 24% of the excess $ 86,350 $164,900 $13,293 plus 24% of the excess over $86,375 over $86,350 $164,925 $209,425 $33,603 plus 32% of the excess $164,900 $209,400 $32,145 plus 32% of the excess over $164,925 over $164,900 $209,425 $523,600 $47,843 plus 35% of the excess $209,400 $523,600 $46,385 plus 35% of the excess over $209,425 over $209,400 $523,600 $157,804.25 plus 37% of the excess $523,600 $156,355 plus 37% of the excess over $523,600 over $523.600 Schedule Y-1-Married Filing Jointly Schedule Y-2-Married Filing Separately or Qualifying Widow(er) If taxable If taxable income is But not income is But not over: over: The tax is: over over The tax is: 0 $ 9,950 10% of taxable income $ 0 $ 19,900 10% of taxable income 9.950 $ 40,525 $995 plus 12% of the excess $ 19.900 $ 81,050 $1,990 plus 12% of the excess over $ 9.950 over $19,900 $ 40,525 $ 86,375 $4,664 plus 22% of the excess $ 81,050 $172,750 $9,328 plus 22% of the excess over $40.525 over $81,050 $ 86,375 $164,925 $14,751 plus 24% of the excess $172,750 $329,850 $29,502 plus 24% of the excess over $86,375 over $172,750 $164,925 $209,425 $33,603 plus 32%% of the excess $329,850 $418,850 $67.206 plus 32%% of the excess over $164,925 over $329,850 $209,425 $314,150 $47,843 plus 35% of the excess $418,850 $628,300 $95,686 plus 35% of the excess over $209,425 over $418,850 $314,150 $84,496.75 plus 37% of the excess $628,300 $168,993.50 plus 37% of the excess over $314,150 over $628,300