Mr and Mrs David file a joint tax return. They have $169,300 taxable income in 2018, $120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate. Compute their tax savings from the preferential rate.

Question

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The Davids' tax liability is $25,695 ($18,345 tax on $120,300 ordinary income + $7,350 tax on $49,000 preferential income). The tax on $169,300 ordinary income would be $29,211. The tax savings from the preferential rate is $3,516.

Mr and Mrs David File a Joint Tax Return