Chapter 3 Activity - Taxes Individual Income Tax Brackets (2020) Marginal Head of Tax Rate Single, taxable Joint, taxable income over: income over: Household, taxable income over: 10% $0 $0 $0 12% $9,875 $19,750 $14, 100 22% $40,125 $80,250 $53,700 24% $85,525 $171,050 $85,500 32% $163,300 $326,600 5163,300 35% $207,350 $414,700 $207,350 37% $518,400 $622,050 $518,400 Standard Deduction Amounts (2020) Filing Status Deduction Amount Single $12,400 Married Filing Jointly $24,800 Head of Household $18,650Standard Deduction Amounts (2020) Filing Status Deduction Amount Single $12,400 Married Filing Jointly $24,800 Head of Household $18,650 Long-term Capital Gains & Qualified Dividends (2020) Tax Rate Single Joint Head of Household 0% Under $40,000 Under $80,000 Under $53,600 15% $40,000 $80,000 $53,600 20% $441,450 $496,600 $469,050 Additional 3.8% Net Investment Income Tax for MAGI over $200,000 / $250,000 / $200,0001. Calculate the federal income tax liability, marginal tax rate, and average tax rate for each of the following scenarios. Assume the following for all scenarios: all income is traditionally earned, the maximum allowable standard deduction is taken, and no other deductions/credits are applied. Single Join axable Income Tax Marginal Average Taxable Marginal Average Gross Income Income Tax Income Rate Rate Income Rate Rate $40,000 $75,000 $150,000 $500,000 $1,000,000 $10,000,000 2. REACTION: What do you make of your findings above? What surprised (or did not surprise) you?Federal Income Tax Summary (2017) Top 1% Top 5% Top 10% Top 25% Top 50% Bottom 50% All Taxpayers Number of Returns 1,432,952 7, 164,758 14,329,516 35,823,790 71,647,580 71,647,580 143,295, 160 Adjusted Gross Income ($ millions) $2,301,449 $3,995,037 $5,220,949 $7,561,368 $9,706,054 $1,230,446 $10,936,500 Share of Total Adjusted Gross Income 21.0% 36.5% 47.7% 69.1% 88.7% 11.3% 100.0% Income Taxes Paid ($ millions) $615,979 $946,954 $1, 122, 158 $1,378,757 $1,551,537 $49,772 $1,601,309 Share of Total Income Taxes Paid 38.5% 59.1% 70.1% 86.1% 96.9% 3.1% 100.0% Income Split Point $515,371 $208,053 $145,135 $83,682 $41,740 $41,740 Average Tax Rate 26.8% 23.7% 21.5% |18.2% 16.0% 4.0% 14.6% Note: numbers above are for taxpayers, not households... i.e. "the top 25% of taxpayers," not "households" 3. The top 1% of taxpayers make at least $ and pay % of federal income taxes. Their average tax rate is %. 4. The top 10% of taxpayers make at least $ and pay % of federal income taxes. Their average tax rate is %. 5. The top 50% of taxpayers make at least $ and pay % of federal income taxes. Their average tax rate is %. 6. The bottom 50% of taxpayers make less than $ and pay % of federal income taxes. Their average tax rate is %. 7. REACTION: What do you make of your findings above? What surprised (or did not surprise) you
