Kim and Kayne have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union.a. Suppose Kim and Kanye both earn$65,000(so their combined income is$130,000).Using the tax bracket informationData table(Click the icon here in order to copy the contents of the data table below into a spreadsheet.) TABLE 1.2: Federal Income Tax Rates and Brackets for Individual Returns (2018) Tax Rates Taxable IncomeTaxes10.0% $0 to $9,87510% of taxable income12.0% $9,876 to $40,125$987.50, plus 12% of the amount over $9,87622.0% $40,126 to $85,525$4,617.50, plus 22% of the amount over $40,12624.0% $85,526 to $163,300$14,605.50, plus 24% of the amount over $85,52632.0% $163,301 to $207,350$33,271.50, plus 32% of the amount over $163,30135.0% $207,351 to $518,400$47,367.50, plus 35% of the amount over $207,35137.0% Over $518,401$156,235.50, plus 37% of the amount over $518,401 TABLE 1.2: Tax Rates and Income Brackets for Joint Returns (2018) Taxable IncomeTax RatesJoint Returns10%$0 to $19,75012%$19,751 to $80,25022%$80,251 to $171,05024%$171,051 to $326,60032%$326,601 to $414,70035%$414,701 to $622,05037%Over $622,050,calculate the combined tax bill that they would pay if they remain single, and compare that to the taxes they would pay if they were married and filed a joint return.b. Now suppose that Kim and Kanye both earn$400,000(so their combined income is$800,000).Calculate the combined tax bill that they would pay if they remain single, and compare that to the taxes that they would pay if they were married and filed a joint return.c. What differences do you find in parts(a)and(b)?What is the cause of these differences?

Tax is a compulsory obligation on the shoulders of all taxable income earners. However, the tax law…

Answered: Income Tax

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Kim and Kayne have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union.

a. Suppose Kim and Kanye both earn

$65,000

(so their combined income is

$130,000).

Using the tax bracket information

Data table

(Click the icon here

in order to copy the contents of the data table below into a spreadsheet.)

TABLE 1.2: Federal Income Tax Rates and Brackets for Individual Returns (2018)

Tax Rates	Taxable Income	Taxes
10.0%	$0 to $9,875	10% of taxable income
12.0%	$9,876 to $40,125	$987.50, plus 12% of the amount over $9,876
22.0%	$40,126 to $85,525	$4,617.50, plus 22% of the amount over $40,126
24.0%	$85,526 to $163,300	$14,605.50, plus 24% of the amount over $85,526
32.0%	$163,301 to $207,350	$33,271.50, plus 32% of the amount over $163,301
35.0%	$207,351 to $518,400	$47,367.50, plus 35% of the amount over $207,351
37.0%	Over $518,401	$156,235.50, plus 37% of the amount over $518,401

TABLE 1.2: Tax Rates and Income Brackets for Joint Returns (2018)
	Taxable Income
Tax Rates	Joint Returns
10%	$0 to $19,750
12%	$19,751 to $80,250
22%	$80,251 to $171,050
24%	$171,051 to $326,600
32%	$326,601 to $414,700
35%	$414,701 to $622,050
37%	Over $622,050

calculate the combined tax bill that they would pay if they remain single, and compare that to the taxes they would pay if they were married and filed a joint return.

b. Now suppose that Kim and Kanye both earn

$400,000

(so their combined income is

$800,000).

Calculate the combined tax bill that they would pay if they remain single, and compare that to the taxes that they would pay if they were married and filed a joint return.

c. What differences do you find in parts

(a)

and

(b)?

What is the cause of these differences?

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