Solve the Problem $15 \%$ Marginal Rate Affects Income Starting At $\$ 8925$

Solve the problem. Refer to the table if necessary. 2013 Marginal Tax Rates, Standard Deductions, and Exemptlons**


- Each higher marginal rate begins where the prior one leaves off. For example, for a single person, the $15 \%$ marginal rate affects income starting at $\$ 8925$ , which is where the $10 \%$ rate leaves off, and continuing up to $\$ 36,250$ .
" This table ignores the effects of (i) exemption and deduction phase-outs that apply to high-income taxpayers and (ii) the alternative minimum tax (AMT) that affects many middle- and high-income taxpayers.
-Abbey earned $70,218 in wages. Kathryn earned $70,218, all in dividends and long-term capital gains. Calculate the total tax owed by each, including both FICA and income taxes. Assume they
Are both single and take the standard deduction. Note that long-term capital gains and dividends
Are taxed at 0% for income in the 10% and 15% tax brackets and at 15% for income in all higher tax
Brackets.

A) Abbey: $\$ 16,355$
Kathryn: $\$ 3595$

B) Abbey: \$10,983
Kathryn: $\$ 3595$

C) Abbey: $\$ 16,864$
Kathryn: $\$ 5992$

D) Abbey: $\$ 15,590$
Kathryn: $\$ 8586$

Correct Answer:

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