Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U. S. tax rate schedule for year 2018, what is his effective tax rate (rounded) ? (Tax rate schedule

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Business

Jerry Short

6 May, 11:52

Marc, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U. S. tax rate schedule for year 2018, what is his effective tax rate (rounded) ? (Tax rate schedule

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Answers (1)

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Tony Williams · Answer 1

The answer is: Marc's effective tax rate is 18.29% equivalent to $18,289.50

Explanation:

Marc is a single filer, so his taxable income of $100,000 falls under the fourth tax bracket ($82,501 to $157,500) with a tax rate of 24%. To calculate Marc's effective tax rate:

Taxes due = $14,089.50 + [24% x ($100,000 - $82,500) ]

= $14,089.50 + (24% x $17,500)

= $14,089.50 + $4,200

= $18,289.50

So Marc's effective tax rate (ETR) = ($18,289.50 / $100,000) x 100 = 18.29%

Note: The $10,000 Marc earned in interest from municipal bonds (City of Birmingham bonds) are tax exempt, so they are not included in these calculations.