Mr. Hoosier has gathered all these data about his finances. Salary $159,000

Taxable interest $5600

Municipal Bond interest $15,000

Total Itemized deductions $9500

The personal exemption is $4700. The standardized deduction for a single filer is 5000.

1. His tax is $37,490.

2. His average effective tax rate is 22%

3. His average tax rate is 24.93%

4. His marginal tax rate is 35%.

5. His tax liability will fall by $170

6. His tax liability will fall by $500.

Step-by-step explanation:

Note: This question is not complete. See the attached pdf file for the complete question.

The explanation of the answer is now given as follows:

1. What is his tax?

Note: See the attached excel for Mr. Hoosier's Tax Computation Based on the Tax Table in the question.

From the attached excel file, the Net tax is $37,490 which is his tax.

Therefore, his tax is $37,490.

2. His average effective tax rate

His average effective tax rate = Tax /  (Taxable income + Tax exempt income) = Tax /  (Taxable income +Municipal Bond interest) = $37,490 / ($150,400 + $20,000)  = 0.2200, or 22%

3. His average tax rate

Average tax rate = Tax / Taxable Income = $37,490 / $150,400 = 24.93%

4. His marginal tax rate

His marginal tax rate is 35% as in the tax computation used based on the tax table.

5. Assume he discovers that he is eligible for a 500 tax deduction. How much does his tax liability fall with that addition?

Taxable income = 150400 - 500 = $149,900

Based on the tax table in the question, we have:

Tax = 8850 + (149900 - 55000) * 30% = $37,320

Reduction in tax liability = $37,490 - $37,320 =$170

Therefore, his tax liability will fall by $170

6. Now he discovers that he is eligible for a $500 tax credit. How much does his tax liability fall due to this credit?

The purpose of the tax credit is to make tax liability reduced dollar by dollar.

Therefore, if he discovers that he is eligible for a $500 tax credit, his tax liability will fall by $500.

step-by-step explanation:

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