Problem:

Scot and Vidia, married taxpayers, earn $95,000 in taxable income and $5,000 in interest from an investment in City of Tampa bonds. (Use the U.S. tax rate schedule). Explain in detail.

Required:

Question 1: If Scot and Vidia earn an additional $83,500 of taxable income, what is their marginal tax rate on this income?

Question 2: How would your answer differ if they, instead, had $83,500 of additional deductions? Explain in detail.