Mr. Jones is a single person who makes $45,000 in 2019. This year she paid $2,000 in student loan interest and $3,600 to her 401 (k) plan at work. Calculate the following a. Adjusted Gross Income. b. Assuming only standardized deductions available, what is his taxable income for 2019? c. Using 2019 tax brackets, what is his marginal federal tax rate? d. Total federal tax due. e. Average federal tax rate on taxable income. f. Calculate the FICA tax due. g. Assuming no state and city tax rate, what is his effective marginal tax rate?

Answer and Explanation:

A. Adjusted Gross income = Total Income - deductions

= $45,000 - $2,500 - $3,600

= $39400 (A)

B. Adjusted Gross income = Total Income - standardized deductions

= $39400 - $12200

= $27200 (B)

NOTE : $12200 is Standardized Deduction for 2019

C. Marginal Federal tax rate is 12% (C) because Mr jones's income stand between ($9,526 - $38,700)

D. Total tax due = $952.50 + 12% of (excess over 9525)

= $952.50 + 12% ($27200 - $9525)

=$952.50 + $2121

= $3073.5 (D)

E. Average tax rate = total federal tax / total taxable income = $3,073.5 / $27,200 = 0.11299 or 11.299 % (E)

F. FICA tax = 7.65% (Gross profit)

= 7.65% ($45,000)

= $3,422.5 (F)

G. Effective tax rate = total tax / gross income = ($3,073.5 + $3,422.5) / 45000 = 0.1448 or 14.48% (G)