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, what is his effective tax rate (rounded)?
A) 23.08%
B) 16.70%
C) 14.48%
D) 25.00%
E) None of these

Question

Quizplus · Accepted Answer

First, we need to calculate Marc's total income for tax purposes by adding his taxable income and investment income: 
$60,000 (taxable income) + $5,000 (investment income) = $65,000 
Using the tax rate schedule for the year 2014, we can find that Marc's tax liability is $10,452.50. 
Effective tax rate is tax liability as a percentage of total income: 
$10,452.50 / $65,000 = 0.1608 
Rounded to the nearest hundredth of a percent, the effective tax rate is 16.70%. Therefore, the answer is B.

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