Hello,

Charles is a single taxpayer has the following income and deductions for the current tax year:

INCOME

Salary 70,000

Business Income 25,000

Interest Income from bonds 10,000

Tax-exempt bond interest5,000

Total Income 110,000

DEDUCTIONS

Business expenses10,000

Itemized deductions20,000

Personal exemptions4,050

1. Compute the taxable income and federal tax liability for the current year.
2. Compute the marginal, average and effective tax rates.
3. For tax planning purposes, which of the three rates in part 2 is the most important?