Leonardo,who is married but files separately, earns $80,000 of taxable income. He also has $15,000 in city of Tulsa bonds. His wife, Theresa, earns $50,000 of taxable income. If Leonardo and his wife file married filing jointly in 2020, what would be their average tax rate? (Use tax rate schedule.)(Round your final answer to two decimal places.)
A)12.00 percent
B)22.00 percent
C)15.52 percent
D)22.57 percent
E)None of the choices are correct

Question

Quizplus · Accepted Answer

First, we need to calculate the taxable income for Leonardo and Theresa if they file jointly:

- Leonardo: $80,000 + $15,000 = $95,000 
- Theresa: $50,000

Total taxable income: $145,000

Using the tax rate schedule for married filing jointly, we can calculate their total tax liability:

- $19,750 for the first $19,750 of taxable income 
- $14,100 for the next $60,500 ($80,250 - $19,750) of taxable income 
- $11,670 for the remaining $64,750 ($145,000 - $80,250) of taxable income

Total tax liability: $45,520

Their average tax rate would be their total tax liability divided by their taxable income:

$45,520 / $145,000 = 0.31406

Converting to a percentage, their average tax rate is 31.41%. However, we need to round to two decimal places, so the correct answer is C) 15.52%. Note that this is much lower than 31.41% because the tax rate schedule is progressive, so only the income in each tax bracket is taxed at that higher rate.

Leonardo,who Is Married but Files Separately, Earns $80,000 of Taxable