In year 2016, David filed his federal income tax as single taxpayer. David has a
ID: 2572854 • Letter: I
Question
In year 2016, David filed his federal income tax as single taxpayer. David has a taxable income of $65,000. What is David’s tax bill? What are his marginal tax rate and average tax rate? Below is year 2016 tax rate schedule.
Tax Rate
Single
Married/Joint
Head of Household
10%
$0-$9,275
$0 - $18,550
$0 - $13,250
15%
$9,276-$37,650
$18,551-$75,300
$13,251 - $50,400
25%
$37,651- $91,150
$75,301-$151,900
$50,401-$130,150
28%
$91,151- $190,150
$151,901-$231,450
$130,151-$210,800
33%
$190,151- $413,350
$231,451 -$413,350
$210,801-$413,350
35%
$413,351- $415,050
$413,351-$466,950
$413,351-$441,000
39.6%
$415,051 and up
$466,951 and up
$441,001 and up
Continue with the previous question, David has an itemized deduction of $5,000 for year 2016. Should he claim an itemized deduction given that 2016 standard deduction for single is $6,300? If David donated $1,000 to charities in year 2016, what is the tax benefit from his charitable donations?
Tax Rate
Single
Married/Joint
Head of Household
10%
$0-$9,275
$0 - $18,550
$0 - $13,250
15%
$9,276-$37,650
$18,551-$75,300
$13,251 - $50,400
25%
$37,651- $91,150
$75,301-$151,900
$50,401-$130,150
28%
$91,151- $190,150
$151,901-$231,450
$130,151-$210,800
33%
$190,151- $413,350
$231,451 -$413,350
$210,801-$413,350
35%
$413,351- $415,050
$413,351-$466,950
$413,351-$441,000
39.6%
$415,051 and up
$466,951 and up
$441,001 and up
Explanation / Answer
Part 1 : As david filed his federal income tax as single taxpayer and has a taxable income of $65,000 he falls in the 25% tax bracket. Thus his marginal tax rate is 25%. His tax bill and Average tax Rate is calculated as follows:-
Part 2 : David is allowed itemized deduction or standard deduction whichever is higher. As the standard deduction allowed to him is more than his itemised deductions, he should claim standard deduction of $6,300.
If david donated $1,000 to charities in Year 2016 then his total itemized deduction will increases by this amount (i.e $5,000+$1,000 = $6,000). But as standard deduction allowed to him is $6,300 which is more than total itemized deduction of $6,000, he should claim standard deduction.
Taxable Income $65,000 Tax on Ist $37,650 (37,650*15%) (a) $5,647.5 Tax on next $27,350[(65,000-37,650)*25%] (b) $6,837.5 Total Tax Bill (a+b) $12,485 Average Tax rate (12,485/65,000*100) 19.21%