Juan and Jen are a married couple filing jointly and have three qualifying dependent children. They start the year with $300,000 in wealth. In total, they have consumption of $180,000 during the year. Together they have $160,000 of wage income, $8,000 of interest income, $5,000 in realized long-term capital gains, $30,000 of unrealized long-term capital gains, and $20,000 in employer-sponsored health care insurance. They have qualifying "above-the-line" health savings account contributions ($5,000) and IRA contributions ($6,000); $30,000 of qualifying charitable contributions; $18,000 of qualifying mortgage interest; and $15,000 of qualifying state and local taxes.

1. What is economic income (Haig-Simons definition of income) in this example?

2.What is adjusted gross income (AGI)?

3.What is the federal statutory marginal tax rate? Express the percentage as a number rounded to the nearest whole number

4.What is the federal effective marginal tax rate? Express the percentage as a number rounded to the nearest whole number

5.What is the federal average tax rate with respect to AGI?

6.What is the state effective marginal tax rate? Express the percentage as a number rounded to the nearest whole number

7.If the couple in this example made a qualifying $2,500 retirement contribution, how much of that would be offset by federal and state tax savings? NOTE - Work through this calculation and tax credit phaseouts carefully.