Question

Marc, a single taxpayer, earns $122,000 in taxable income and $3,800 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? (Use Tax rate schedules)

https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spilker_10e/taxrateschedule2018.htm
Multiple Choice

24.99%


18.74%


19.91%


26.68%


None of the choices are correct.

Answer 1

None of the choices are correct

Step-by-step explanation:

Given:

Income from city bond = $122,000

Find:

Effective tax rate

Computation:

We know thar Marc is single tax payee

So,

As per rule

Federal tax = $14,089.50 + (Income - $82,500)24%

Federal tax = $14,089.50 + ($122,000 - $82,500)24%

Federal tax = $23,569.50

Effective tax rate = (Federal tax / Income)100

Effective tax rate = [23,569.50/122,000]100

Effective tax rate = [0.1931]100

Effective tax rate = 19.31% (Approx.)