102. Nick and Jessica are married taxpayers that file married filing separately. Jessica earns $250,000 of taxable income per year. Nick earns $130,000 of taxable income per year. Using the appropriate U.S. tax rate schedule for year 2012, how much tax does each of them pay? What are their marginal and average tax rates? How much tax would they save, if any, if they filed jointly? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%) Nick would owe $31,353.25 and Jessica would owe $72,069.75 computed as follows: Nick: $31,353.25 = $24,332.50 + (33% x ($130,000 - $108,725)). Jessica: $72,069.75 = $52,531 + (35% x ($250,000 - $194,175)). Nick's average tax rate is 24.12%. Average Tax Rate = Jessica's average tax rate is 28.83%. Average Tax Rate = Nick is in the 33% tax rate bracket, and Jessica is in the 35% tax rate bracket. Thus, their marginal tax rates are 33% and 35%, respectively, on small increases in income and deductions. If Nick and Jessica filed jointly, they would owe $102,306.50 in tax. $102,306.50 = $48,665 + (35% x ($380,000 - $217,450)). Thus, filing jointly would save them $1,116.50 (($31,353.25 + $72,069.75) - $102,306.50). AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax. Level of Difficulty: 3 Hard
102. Nick and Jessica are married taxpayers that file married filing separately. Jessica earns $250,000 of taxable income per year. Nick earns $130,000 of taxable income per year. Using the appropriate U.S. tax rate schedule for year 2012, how much tax does each of them pay? What are their marginal and average tax rates? How much tax would they save, if any, if they filed jointly? (Round the tax rates to 2 decimal places, e.g., .12345 as 12.35%) Nick would owe $31,353.25 and Jessica would owe $72,069.75 computed as follows: Nick: $31,353.25 = $24,332.50 + (33% x ($130,000 - $108,725)). Jessica: $72,069.75 = $52,531 + (35% x ($250,000 - $194,175)). Nick's average tax rate is 24.12%. Average Tax Rate = Jessica's average tax rate is 28.83%. Average Tax Rate = Nick is in the 33% tax rate bracket, and Jessica is in the 35% tax rate bracket. Thus, their marginal tax rates are 33% and 35%, respectively, on small increases in income and deductions. If Nick and Jessica filed jointly, they would owe $102,306.50 in tax. $102,306.50 = $48,665 + (35% x ($380,000 - $217,450)). Thus, filing jointly would save them $1,116.50 (($31,353.25 + $72,069.75) - $102,306.50). AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Blooms: Apply Learning Objective: 01-03 Describe the different tax rate structures and calculate a tax. Level of Difficulty: 3 Hard
Spilker--Taxation%20of%20Individuals%202013%204e.docx