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Susan and Stan Britton are a married couple who file a joint income tax return, where the tax rates are based on the tax table 3.5. Assume that their taxable income this year was $268,000. Do not round intermediate calculation. a. What is their federal tax liability? Round your answer to the nearest dollar. $ b. What is their marginal tax rate? Round your answer to the nearest whole number. % c. What is their average tax rate? Round your answer to two decimal places. %

Susan and Stan Britton are a married couple who file a joint income tax return, where the tax rates are based on the tax table 3.5. Assume that their taxable income this year was $268,000. Do not round intermediate calculation. a. What is their federal tax liability? Round your answer to the nearest dollar. $ b. What is their marginal tax rate? Round your answer to the nearest whole number. % c. What is their average tax rate? Round your answer to two decimal places. %

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Susan and Stan Britton are a married couple who file a joint income tax return, where the tax rates are based on the tax table 3.5. Assume that their taxable income this year was $268,000. Do not round intermediate calculation. a. What is their federal tax liability? Round your answer to the nearest dollar. $ b. What is their marginal tax rate? Round your answer to the nearest whole number. % c. What is their average tax rate? Round your answer to two decimal places. %
Transcribed Image Text:Susan and Stan Britton are a married couple who file a joint income tax return, where the tax rates are based on the tax table 3.5. Assume that their taxable income this year was $268,000. Do not round intermediate calculation. a. What is their federal tax liability? Round your answer to the nearest dollar. $ b. What is their marginal tax rate? Round your answer to the nearest whole number. % c. What is their average tax rate? Round your answer to two decimal places. %
Single Individuals If Your Taxable Income Is Up to $9,875 $9,875-$40,125 $40,125-$85,525 If Your Taxable Income Is You Pay This Amount on the Base of the Bracket $ $85,525-$163,300 $163,300-$207,350 $207,350-$518,400 Over $518,400 Married Couples Filing Joint Returns Up to $19,750 $19,750-$80,250 $80,250-$171,050 $171,050-$326,600 $326,600-$414,700 $414,700-$622,050 Over $622,050 0.00 987.50 4,617.50 14,605.50 33,271.50 47,367.50 156,235.00 You Pay This Amount on the Base of the Bracket $ 0.00 1,975.00 9,235.00 29,211.00 66,543.00 94,735.00 167,307.50 Plus This Percentage on the Excess over the Base (Marginal Rate) 10.0% 12.0 22.0 24.0 32.0 35.0 37.0 2020 Individual Tax Rates Plus This Percentage on the Excess over the Base (Marginal Rate) 10.0% 12.0 22.0 24.0 32.0 35.0 37.0 Average Tax Rate at Top of Bracket 10.0% 11.5 17.1 20.4 22.8 30.1 37.0 Average Tax Rate at Top of Bracket 10.0% 11.5 17.1 20.4 22.8 26.9 37.0 Notes: 1. These are the 2020 tax rates that will be paid on tax returns due April 15, 2021. The income ranges at which each tax rate takes effect are indexed with inflation, so they change each year. 2. The average tax rates are always below the marginal rates, but in 2020 the average at the top of the brackets approaches 37% as taxable income rises without limit. 3. In 2018, the personal exemption for the taxpayer and dependents was eliminated. With the deduction limitation on state and local property, income, and sales taxes and the existence of payroll taxes (Social Security and Medicare taxes), the 2020 effective tax rate will be higher than 37%. TABLE 3.5
Transcribed Image Text:Single Individuals If Your Taxable Income Is Up to $9,875 $9,875-$40,125 $40,125-$85,525 If Your Taxable Income Is You Pay This Amount on the Base of the Bracket $ $85,525-$163,300 $163,300-$207,350 $207,350-$518,400 Over $518,400 Married Couples Filing Joint Returns Up to $19,750 $19,750-$80,250 $80,250-$171,050 $171,050-$326,600 $326,600-$414,700 $414,700-$622,050 Over $622,050 0.00 987.50 4,617.50 14,605.50 33,271.50 47,367.50 156,235.00 You Pay This Amount on the Base of the Bracket $ 0.00 1,975.00 9,235.00 29,211.00 66,543.00 94,735.00 167,307.50 Plus This Percentage on the Excess over the Base (Marginal Rate) 10.0% 12.0 22.0 24.0 32.0 35.0 37.0 2020 Individual Tax Rates Plus This Percentage on the Excess over the Base (Marginal Rate) 10.0% 12.0 22.0 24.0 32.0 35.0 37.0 Average Tax Rate at Top of Bracket 10.0% 11.5 17.1 20.4 22.8 30.1 37.0 Average Tax Rate at Top of Bracket 10.0% 11.5 17.1 20.4 22.8 26.9 37.0 Notes: 1. These are the 2020 tax rates that will be paid on tax returns due April 15, 2021. The income ranges at which each tax rate takes effect are indexed with inflation, so they change each year. 2. The average tax rates are always below the marginal rates, but in 2020 the average at the top of the brackets approaches 37% as taxable income rises without limit. 3. In 2018, the personal exemption for the taxpayer and dependents was eliminated. With the deduction limitation on state and local property, income, and sales taxes and the existence of payroll taxes (Social Security and Medicare taxes), the 2020 effective tax rate will be higher than 37%. TABLE 3.5
Expert Solution
Step 1: Meaning of tax liability :

Tax liability appears to be the sum of money or obligations that an individual or business is obligated to pay to the government in the form of taxes. Essentially, whenever the term is used, it refers to the federal income tax liability.

The tax rates for ordinary income are different than tax rates for capital gains and it is the reason capital gains are taxed differently.

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