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Leonardo, who is married but files separately, earns $63,500 of taxable income
Leonardo, who is married but files separately, earns $63,500 of taxable income. He also has $16,600 in city of Tulsa bonds. His wife, Theresa, earns $51,600 of taxable income. If Leonardo instead had $31,600 of additional tax deductions for 2020, his marginal tax rate on the deductions would be: (Use tax rate schedule.) (Round your final answer to two decimal places.)
Expert Solution
| Marginal tax rate is the rate of tax that will be applicable on next $1 of taxable income. So on increase of $1 on taxable income the rate of tax which is applicable is marginal tax rate | |
| We are using 2020 tax schedule | |
| We will use Married filing seprately schedule | |
| His total income is (63500+31600) | 96100 |
| On 63500 tax was 4617.5+(22%*(63500-40125)) | 9760 |
| On 96100 tax would be 14605.5+24%*(96100-85525) | 17143.5 |
| As the additional income falls both in 22% and 24% tax bracket hence we will take the tax rate in which last dollar of income falls. So answer is 24% | |
| Option E None of the choice are correct, as the correct rate is 24% , so all other options are incorrect. | |
| If any doubt please comment |
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