Question
Suppose that the Smith family has four family members and earns $100,000 per year. Among their expenses were $2,000 on interest on home mortgage and
Suppose that the Smith family has four family members and earns $100,000 per year.
Among their expenses were $2,000 on interest on home mortgage and $1,200 payment on the principal of their home.
They also donated $5,000 to charity, paid $7,000 in local taxes and spent $8,000 on food.
The standard deduction is $11,400 and the exemption per person is $3,650.
(a) Which kind of deduction should the Smiths use to minimize their tax bill, standard deduction or itemized deduction?
(b) Calculate how much the Smiths owe in taxes to the government. Please use the tax table below.
(c) What is their marginal tax rate?
(d) What is their effective average tax rate?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started