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 instead had $30,000 of additional tax deductions for year 2018,his marginal tax rate (rounded)on the deductions would be: (Use tax rate schedule)
A)12.00%
B)13.88%
C)22.00%
D)16.37%
E)None of the choices are correct.

Question

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 instead had $30,000 of additional tax deductions for year 2018,his marginal tax rate (rounded)on the deductions would be: (Use tax rate schedule)
A)12.00%
B)13.88%
C)22.00%
D)16.37%
E)None of the choices are correct.

Quizplus · Accepted Answer

First, we need to determine Leonardo's marginal tax rate without the additional deductions. Using the tax rate schedule for 2018, we see that his taxable income of $80,000 falls within the 22% tax bracket. Therefore, his marginal tax rate is 22%.

Now, let's add the $30,000 of additional tax deductions. Since Leonardo files separately, he is not eligible for the standard deduction of $12,000. Thus, the additional deductions will lower his taxable income from $80,000 to $50,000.

With a taxable income of $50,000, Leonardo falls into the 12% tax bracket. Therefore, his marginal tax rate on the additional deductions is 12%.

So, the answer is C) 22.00%.

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