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 2014, how much federal tax will he owe?
A) $15,000.00
B) $12,375.00
C) $10,856.25
D) $9,412.50
E) None of these

Question

Quizplus · Accepted Answer

First, we need to calculate Marc's taxable income by subtracting the standard deduction and personal exemption: 
$60,000 - $6,200 (standard deduction) - $3,950 (personal exemption) = $49,850
Then, we can use the tax rate schedule to determine his tax liability: 
10% on income up to $9,075 = $907.50 
15% on income between $9,076 and $36,900 = $5,183.50 
25% on income between $36,901 and $49,850 = $3,765 
Total federal tax liability = $907.50 + $5,183.50 + $3,765 = $9,856.25 
(Note: The interest income does not affect the tax rate calculation, but it will need to be reported on his tax return and may be subject to state and local taxes.) 
Therefore, the best choice is C.

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