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Campbell, a single taxpayer earns $400,000 in taxable income and $2,000 in interest from an investment in State of NY bonds. How much federal tax will she owe? What is her average tax rate? What is her effective tax rate? What is her current marginal tax rate?

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Tundexiidn

Owed federal tax is $115,689.50, average tax rate is 28.92 percent, effective tax rate is 28.78 percent,  current marginal tax rate is 35 percent.

How much federal tax will she owe?

What is her current marginal tax rate?

= $45,689.50 + 35% x ($400,000 - $200,000).

= $115,689.50

What is her average tax rate?

Average tax rate = Total tax = $115,689.50

Average tax rate = 28.92%

What is her effective tax rate?

Effective tax rate = Total tax = $115,689.50 = 28.78%

Total income ($400,000 + $2,000)

What is her current marginal tax rate?

Her marginal tax rate on deductions up to $200,000 will be 35 percent. However, her marginal tax rate on the next $100,000 of income will be 35%, and income earned over $500,000, will be taxed at 37 percent.

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