Problem: Following is a hypothetical federal income tax schedule for a couple filing jointly: Taxable income Over But not over Tax rate $0 $30,000 10% $30,000 $60,000 20% $60,000 $110,000 30% $110,000 and above 40% Mr. and Mrs. Smith are a married couple raising two young children. The Smith total household income last year was $120,000. The standard deduction is $26,000 for each household. There is also a child tax credit of $2,000 per child. They also incurred the following expenses during the year: state personal income tax ($4,000) local property tax ($5,000) charitable donation ($4,000), and mortgage interest ($19,000). They also contributed $10,000 to their 401(k) retirement account. Please answer the following questions. (When answering the question, please write out as many steps as you can in your calculation, so that I can give you partial credit even if your final answer is incorrect.)
What is Smith family's adjusted gross income?
What is the family's taxable income?
What is the family's federal income tax liability for the year?
What are the family's average and marginal tax rates?