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Jorge and Anita, married taxpayers, earn in taxable income and in interest from an investment in City of Heflin
bonds. (Use the U.S. tax rate schedule for married filing jointly.)
Required:
a. If Jorge and Anita earn an additional of taxable income, what is their marginal tax rate on this income?
b. What is their marginal rate if, instead, they report an additional in deductions?
Note: For all requirements, round your answers to 2 decimal places.

Ask by Paul Bowen. in the United States
Jan 23,2025

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Answer

  • a. The marginal tax rate on the additional $100,000 of taxable income is 24.00%.
  • b. The marginal tax rate on the additional $100,000 in deductions is 12.00%.

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Beyond the Answer

To determine Jorge and Anita’s marginal tax rates under the given scenarios, we first need to understand how the U.S. tax rate schedule for married filing jointly works.

a. With an Additional of Taxable Income

  1. Their current taxable income is .
  2. With an additional , their new taxable income will be .
  3. Referring to the tax brackets, for married couples filing jointly in 2023, the bracket for falls into the 24% marginal tax rate.
Thus, the marginal tax rate on this additional income is 24%.

b. With an Additional in Deductions

  1. If they report an additional in deductions, their taxable income becomes .
  2. In this case, the applicable tax bracket is significantly lower. The 12% marginal tax rate applies up until for married individuals filing jointly in 2023.
Therefore, their marginal tax rate if they report an additional in deductions is 12%.

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