ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM | FREE SOLVED ANSWERS
Tameka and Jermaine filed a joint tax return and had taxable income of $198,125 that is taxed as follows:
$23,200 x 10% = $ 2,320.00
($94,300 $23,200) x 12% = $8,532.00
($198,125 $94,300) x 22% = 22,842.00.
Total tax liability= $ 33,694.00
Their marginal tax rate is:
Tameka and Jermaine filed a joint tax return and had taxable income of $198,125 that is taxed as follows:
$23,200 x 10% = $ 2,320.00
($94,300 $23,200) x 12% = $8,532.00
($198,125 $94,300) x 22% = 22,842.00.
Total tax liability= $ 33,694.00
Their marginal tax rate is:
Multiple Choice
- a. 10%
- b. 12%
- c. 17%
- d. 22%
Correct Answer: D. 22%
Their marginal tax rate is:
Step 1: Understand Marginal Tax Rate
The marginal tax rate is the tax rate applied to the last dollar of taxable income earned. In a progressive tax system, different income brackets are taxed at different rates. The marginal tax rate is the rate at which the highest portion of income is taxed.
Step 2: Identify the Highest Tax Bracket
The problem provides the tax calculation for Tameka and Jermaine’s taxable income of \$198,125:
- $23,200 is taxed at 10%.
- The income between $23,200 and $94,300 is taxed at 12%.
- The income between $94,300 and $198,125 is taxed at 22%.
Since their taxable income is $198,125, the last portion of their income falls into the highest tax bracket applied to their income.
Step 3: Determine the Marginal Tax Rate
Looking at the calculation, the last portion of their income, which is the amount exceeding $94,300 up to their total taxable income of $198,125, is taxed at 22%. Therefore, their marginal tax rate is 22%.
Answer:
The correct option is (d) 22%.