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Chuck, a single taxpayer, earns $77,600 in taxable income and $12,900 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) 1.) Required: If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income?

Chuck, a single taxpayer, earns $77,600 in taxable income and $12,900 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) 1.) Required: If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chuck, a single taxpayer, earns $77,600 in taxable income and $12,900 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) 1.) Required: If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income? 2.) What is his marginal rate if, instead, he had $40,000 of additional deductions? 22% and 24% were both wrong. here is the feedback from my instructor: If Chuck earns an additional $40,000 of taxable income, his marginal tax rate on the income is calculated as marginal tax rate = change in tax/change in taxable income = ($22,059.50 - $12,689.00)/($117,600 - $77,600). The revised tax is computed as follows: $22,059.50 = $15,213.50 + 24% ($117,600 - $89,075). If instead Chuck instead had $40,000 of additional tax deductions, his marginal tax rate on the deductions would be calculated as follows: Marginal tax rate = Change in tax/Change in taxable income = ($4,306.50 - $12,689.00)/($37,600 - $77,600) and $4,306.50 for the revised tax is computed as follows: $4,306.50 = $1,027.50 +12% ($37,600.00 - $10,275). Can you please tell me what the right percentages are for both 1 and 2??
Transcribed Image Text:Chuck, a single taxpayer, earns $77,600 in taxable income and $12,900 in interest from an investment in City of Heflin bonds. (Use the U.S. tax rate schedule.) 1.) Required: If Chuck earns an additional $40,000 of taxable income, what is his marginal tax rate on this income? 2.) What is his marginal rate if, instead, he had $40,000 of additional deductions? 22% and 24% were both wrong. here is the feedback from my instructor: If Chuck earns an additional $40,000 of taxable income, his marginal tax rate on the income is calculated as marginal tax rate = change in tax/change in taxable income = ($22,059.50 - $12,689.00)/($117,600 - $77,600). The revised tax is computed as follows: $22,059.50 = $15,213.50 + 24% ($117,600 - $89,075). If instead Chuck instead had $40,000 of additional tax deductions, his marginal tax rate on the deductions would be calculated as follows: Marginal tax rate = Change in tax/Change in taxable income = ($4,306.50 - $12,689.00)/($37,600 - $77,600) and $4,306.50 for the revised tax is computed as follows: $4,306.50 = $1,027.50 +12% ($37,600.00 - $10,275). Can you please tell me what the right percentages are for both 1 and 2??
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