41.Using the facts in problem 40, if Scot and Vidia earn an additional $80,000 of taxable income, what is their marginal tax rate on this income? How would your answer differ if they, instead, had $80,000 of additional deductions?

40. Scot and Vidia, married taxpayers, earn $240,000 in taxable income and $5,000 in interest from an investment in City of Tampa 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?

1) Federal tax due

Tax due = 29,502 + 24% of excess over 172,750

Tax due = 29,502 + 24%(240,000 - 172,750)

Tax due = 45,642

2) Average tax rate

Average tax rate = 45,642 / 240,000

Average tax rate = 0.190175, or 19.02%

3) Effective tax rate

Effective tax rate = 45,642 / (240,000 + 5,000)

Effective tax rate =0.1862938776, or 18.63%

4) Marginal tax rate

The marginal tax rate is 24%

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