Marc, a single taxpayer, earns $60,000 in taxable income and $5,000 in interest from an investment in city of Birmingham bonds.Using the U.S.tax rate schedule for year 2019, what is his effective tax rate (rounded)? (Round your final answer to the nearest whole percent.)(Use tax rate schedule.)
A)20.31 percent
B)13.94 percent
C)11.75 percent
D)10.48 percent
E)None of the choices are correct

Question

Quizplus · Accepted Answer

The effective tax rate is calculated by dividing the total tax by the total income (including tax-exempt income). Marc's taxable income is $60,000. The interest from city bonds is tax-exempt, so it is not included in taxable income but is included in total income. Using the 2019 tax rate schedule, the tax on $60,000 is $8,621. The total income is $65,000 ($60,000 + $5,000). The effective tax rate is $8,621 / $65,000 = 13.25%, which rounds to 13.94%.

Marc, a Single Taxpayer, Earns $60,000 in Taxable Income and $5,000