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Suppose Elaine has a taxable income of $175,000 and is subject to the following tax schedule as she is married filing jointly.

1) What is Elaine's marginal income tax rate (Hint: tax rate on next dollar earned)?

[Enter the answer in as a percent (e.g. 10.00%=10.00)]

2) What is Elaine's effective income tax rate (Hint: an individual's effective tax rate represents the average of all tax brackets that their income passes through)?

[Enter the answer in as a percent (e.g. 10.00%=10.00)]

3) What is Elaine's after-tax earnings?

4) Suppose Elaine incurred $5,000 in interest income from municipal bonds, received $8,000 in child support, paid $5,500 in charitable contributions, $7,500 in home mortgage interest, $8,500 in state income taxes, and $2,000 in property taxes. Should Elaine use itemized deductions or the standard deduction of $25,900?

5) Suppose Elaine incurred $5,000 in interest income from municipal bonds, received $8,000 in child support, paid $5,500 in charitable contributions, $7,500 in home mortgage interest, $8,500 in state income taxes, and $2,000 in property taxes. How much in itemized deductions may Elaine take?

Tax rate Taxable income bracket Tax owed 10% $0 to $9,950 10% of taxable income 12% $9,951 to $40,525 $995 plus 12% of the amount over $9,950 22% $40,526 to $86,375 $4,664 plus 22% of the amount over $40,525 24% $86,376 to $164,925 $14,751 plus 24% of the amount over $86,375 32% $164,926 to $209,425 $33,603 plus 32% of the amount over $164,925 35% $209,426 to $523,600 $47,843 plus 35% of the amount over $209,425 37% $523,601 or more $157,804.25 plus 37% of the amount over $523,600

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