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 earned an additional $30,000 of taxable income this year, what would be the marginal tax rate on the extra income for 2020? (Use tax rate schedule.)(Round your final answer to two decimal places.)
A)22.00 percent
B)18.81 percent
C)24.00 percent
D)23.62 percent
E)None of the choices are correct

Question

Quizplus · Accepted Answer

First, we need to determine Leonardo and Theresa's combined taxable income for 2020. 
Leonardo's taxable income: $80,000 
Theresa's taxable income: $50,000 
Total taxable income: $130,000

Using the tax rate schedule for single filers for 2020, we can determine the tax that would be owed on an additional $30,000 of income:

Tax on $30,000 of income: $6175 
Effective tax rate on $30,000 of income: 20.58%

However, because Leonardo files separately from his spouse, we need to use the tax rate schedule for married filing separately:

Tax on $30,000 of income: $7410 
Effective tax rate on $30,000 of income: 24.70%

Therefore, the marginal tax rate on an additional $30,000 of taxable income for Leonardo in 2020 is 23.62% (using the closest tax bracket).

Leonardo, Who Is Married but Files Separately, Earns $80,000 of Taxable