Question

Mitch, a single taxpayer, earns $100,000 in taxable income and $10,000 in interest from an investment in city of Birmingham Bonds. Using the U.S. tax rate schedule for year 2018, how much federal tax will he owe? (Tax rate schedule)A) $28,000. B) $21,175.75. C) $16,712.50. D) $25,000. E) None of the above.

Answer 1

Answer:

The answer is: E) None of the above

Explanation:

Mitch´s earnings fall into the third category set by the IRS for taxable income:

earnings between:          $78,951 - $168,400  

taxes due:                        $9,086 + (22% of the amount over $78,950)

                                      = $9,086 + (22% x $21,050)

                                      = $9,086 + $4,631

federal taxes due         = $13,717

Since Mitch earns $10,000 in interest from a municipal bond (city of Birmingham), he is except from paying federal taxes for that income.