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 2013,how much federal tax will he owe?

Question

Quizplus · Accepted Answer

Using the U.S. tax rate schedule for year 2013, we can calculate Marc's federal tax as follows:

1. Calculate taxable income: 
$60,000 (earned income) + $5,000 (investment income) = $65,000

2. Identify tax bracket: 
$65,000 falls into the 25% tax bracket

3. Calculate tax owed:
For income in the 25% tax bracket, the tax owed is the sum of the tax on the lower amount (in this case, the 15% tax bracket) plus the tax on the amount over the lower limit of the higher bracket.
 
For $65,000 of taxable income, the tax owed can be calculated as:
($36,900 - $8,925) x 0.15 + ($65,000 - $36,900) x 0.25

= $3,768.75 + $6,160

= $9,928.75

4. Subtract any applicable tax credits: 
There is no information given in the question about any tax credits, so we assume there are none.

Therefore, Marc will owe $10,928.75 in federal tax. The correct answer is C.

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