Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information: She received $82,000 in salary. She received $12,000 of dividend income. She received $5,000 of interest income on Home Depot bonds. She received $22,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $9,000. She received $10,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,500. Mary only has allowable itemized deductions of $7,500, so she will take the standard deduction of $12,400. The standard deduction is subtracted from her gross income to determine her taxable income. Assume that her tax rates are based on the tax tables presented in the chapter. What is Mary’s federal tax liability? What is her marginal tax rate? What is her average tax rate?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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PERSONAL TAXES Mary Jarvis is a single individual who is working on filing her tax return for the previous year. She has assembled the following relevant information: She received $82,000 in salary. She received $12,000 of dividend income. She received $5,000 of interest income on Home Depot bonds. She received $22,000 from the sale of Disney stock that was purchased 2 years prior to the sale at a cost of $9,000. She received $10,000 from the sale of Google stock that was purchased 6 months prior to the sale at a cost of $7,500. Mary only has allowable itemized deductions of $7,500, so she will take the standard deduction of $12,400. The standard deduction is subtracted from her gross income to determine her taxable income. Assume that her tax rates are based on the tax tables presented in the chapter. What is Mary’s federal tax liability? What is her marginal tax rate? What is her average tax rate?
Table 3.5.
2020 Individual Tax
Rates
Single Individuals
You Pay This
Plus This Percentage
Average Tax
Rate at Top
of Bracket
If Your Taxable
Amount on the
on the Excess over
Income Is
Base of the Bracket
the Base (Marginal Rate)
Up to $9,875
$ 0.00
10.0%
10.0%
$9,875-$40,125
987.50
12.0
11.5
$40,125-$85,525
4,617.50
22.0
17.1
$85,525-$163,300
14,605.50
24.0
20.4
$163,300-$207,350
33,271.50
32.0
22.8
$207,350-$518,400
47,367.50
35.0
30.1
Over $518,400
156,235.00
37.0
37.0
Married Couples Filing Jolnt Returns
You Pay This
Plus This Percentage
on the Excess over the
Average Tax
If Your Taxable
Amount on the
Rate at
Income Is
Base of the Bracket
Base (Marginal Rate)
Top of Bracket
Up to $19,750
$ 0.00
10.0%
10.0%
$19,750-$80,250
1,975.00
120
11.5
$80,250-$171,050
9,235.00
220
17.1
$171,050-$326,600
29,211.00
24.0
20.4
$326,600-$414,700
66,543.00
32.0
22.8
$414,700-$622,050
94,735.00
35.0
26.9
Over $622,050
167,307.50
37.0
37.0
Transcribed Image Text:Table 3.5. 2020 Individual Tax Rates Single Individuals You Pay This Plus This Percentage Average Tax Rate at Top of Bracket If Your Taxable Amount on the on the Excess over Income Is Base of the Bracket the Base (Marginal Rate) Up to $9,875 $ 0.00 10.0% 10.0% $9,875-$40,125 987.50 12.0 11.5 $40,125-$85,525 4,617.50 22.0 17.1 $85,525-$163,300 14,605.50 24.0 20.4 $163,300-$207,350 33,271.50 32.0 22.8 $207,350-$518,400 47,367.50 35.0 30.1 Over $518,400 156,235.00 37.0 37.0 Married Couples Filing Jolnt Returns You Pay This Plus This Percentage on the Excess over the Average Tax If Your Taxable Amount on the Rate at Income Is Base of the Bracket Base (Marginal Rate) Top of Bracket Up to $19,750 $ 0.00 10.0% 10.0% $19,750-$80,250 1,975.00 120 11.5 $80,250-$171,050 9,235.00 220 17.1 $171,050-$326,600 29,211.00 24.0 20.4 $326,600-$414,700 66,543.00 32.0 22.8 $414,700-$622,050 94,735.00 35.0 26.9 Over $622,050 167,307.50 37.0 37.0
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