Latesha, a single taxpayer, had the following income and deductions for the tax year 2016:

a. Compute Latesha€™s taxable income and federal tax liability for 2016 (round to dollars).

b. Compute Latesha€™s marginal, average, and effective tax rates.

c. For tax planning purposes, which of the three rates in Part b is the most important?

Transcribed Image Text:

$ 80,000 25,000 10,000 5,000 INCOME: Salary Business Income Interest income from bonds Tax-exempt bond interest TOTAL INCOME 120,000 $ 9,500 20,000 4,050 DEDUCTIONS: Business expenses Itemized deductions Personal exemption TOTAL DEDUCTIONS 33,550