Chuck, a single taxpayer, earns $76,600 in taxable income and $10,000 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) Required: If Chuck earns an additional $40,240 of taxable income, what is his marginal tax rate on this income? What is his marginal rate if, instead, he had $40,240 of additional deductions?

Individuals

Schedule X-Single

If taxable income is over:	But not over:	The tax is:
$ 0	$ 9,875	10% of taxable income
$ 9,875	$ 40,125	$987.50 plus 12% of the excess over $9,875
$ 40,125	$ 85,525	$4,617.50 plus 22% of the excess over $40,125
$ 85,525	$163,300	$14,605.50 plus 24% of the excess over $85,525
$163,300	$207,350	$33,271.50 plus 32% of the excess over $163,300
$207,350	$518,400	$47,367.50 plus 35% of the excess over $207,350
$518,400		$156,235 plus 37% of the excess over $518,400