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Compute the marginal, average and effective tax rates

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Reference no: EM132482102

Question - Loretta is a single taxpayer has the following income and deductions for the current tax year (assume no QBI deduction):

INCOME

Salary $70,000

Business Income 25,000

Interest Income from bonds 10,000

Tax-exempt bond interest 5,000

Total Income $110,000

DEDUCTIONS: Business expenses $10,000

Itemized deductions 20,000

Requirements -

1. Compute the total income, adjusted gross income and taxable income for 2018.

2. Compute the marginal, average and effective tax rates.

3. For tax planning purposes, which of the three rates in part 2 is the most important?

Reference no: EM132482102

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