Question
Jamie Lee Jackson, age 26, is in her last semester of college, and graduation day is just around the corner! It is the time of
Jamie Lee Jackson, age 26, is in her last semester of college, and graduation day is just around the corner! It is the time of year again when Jamie Lee must file her annual federal income taxes. Last year, she received an increase in salary from the bakery, which brought her gross monthly earnings to $2,550, and she also opened up an IRA, to which she contributed $300. Her savings accounts earn 2 percent interest per year, and she also received an unexpected $1,000 gift from her great aunt. Jamie was also lucky enough last year to Page 103win a raffle prize of $2,000, most of which was deposited into her regular savings account after paying off her credit card balance.
Current Financial Situation
Assets:
Checking account, $2,250
Savings account, $6,900 (interest earned last year: $125)
Emergency fund savings account, $3,900 (interest earned last year: $75)
IRA balance, $350 ($300 contribution made last year)
Car, $3,000
Liabilities:
Student loan, $10,800
Credit card balance, $0 (interest paid last year: $55)
Income:
Gross monthly salary, $2,550
Monthly Expenses:
Rent obligation, $275
Utilities obligation, $135
Food, $130
Gas/Maintenance, $110
Credit card payment, $0
Savings:
Regular savings monthly deposit, $175
Rainy day savings monthly deposit, $25
Entertainment:
Cake decorating class, $40
Movies with friends, $60
Jamie Lee has a marginal tax rate of 15 percent and an average tax rate of 11 percent. Explain why there is a difference between the two rates.
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