Question

Scot and Vidia, married taxpayers, earn $246,000 in taxable income and $5,000 in interest from an investment in City of Tampa bonds. (Use the U.S. tax rate schedule for married filing jointly). Required: If Scot and Vidia earn an additional $81,200 of taxable income, what is their marginal tax rate on this income

Answer 1

Currently (assuming a 2020 tax schedule), Scott and Vidia's tax liability = $29,211 + [24% x ($246,000 - $171,050)] = $47,199*

municipal bonds are not taxed by the federal government, so they do not pay any taxes on the interests earned on the City of Tampa bonds.

if they earn an additional $81,200, then their tax liability will be:

$66,543 + [32% x ($327,200 - $326,600)] = $66,735

their marginal tax rate = 32%