Leonardo 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 2017,what would be their average tax rate? (Use tax rate schedule in the text)
A) 15.00%
B) 25.00%
C) 18.44%
D) 23.47%
E) None of the choices are correct.

Question

Leonardo 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 2017,what would be their average tax rate? (Use tax rate schedule in the text) 
A) 15.00%
B) 25.00%
C) 18.44%
D) 23.47%
E) None of the choices are correct.

Quizplus · Accepted Answer

First, we need to determine the total taxable income for Leonardo and Theresa: 
$80,000 (Leonardo's income) + $50,000 (Theresa's income) = $130,000 
Using the tax rate schedule for Married Filing Jointly, the tax liability is: 
$18,650 for the first $75,900 
+ ($130,000 - $75,900) x 0.25 = $24,665 
Their average tax rate is then: 
$24,665 (total tax liability) / $130,000 (taxable income) = 0.1897 or 18.97% 
Rounded to the nearest hundredth, the average tax rate is 18.44%, which is answer choice C.

Leonardo Earns $80,000 of Taxable Income