Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket. Ava's salary is $106,150. Her employer offers a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in exchange for a $4,750 reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs $5,225 each year, Ava is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Analyze the effect of the two alternatives. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Click to view Percentage Credit based on Adjusted Gross Income. a. If Ava and Leo take advantage of the plan, they would v save income taxes because the reimbursement of child care expenses is excluded from v gross income. The income tax savings associated with participating in the plan would be X . In addition, Ava will save $ of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ . Therefore Ava and Leo's income taxes will be $ higher v if they do not participate in the plan. Feedback V Check My Work The credit for child and dependent care expenses mitigates the inequity felt by working taxpayers who must pay for child care services to work outside the home. This credit is a specified percentage of expenses incurred to enable the taxpayer to work or to seek employment. The credit is claimed by completing and filing Form 2441 (Credit for Child and Dependent Care Expenses). b. Assume, instead, that Ava and Leo's AGI is $24,250 and they are in the 10% tax bracket. The income tax savings associated with participating in the plan would be $ In addition, Ava will save of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Therefore Ava and Leo's income taxes will be $ lower v if they do not participate in the plan.
Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket. Ava's salary is $106,150. Her employer offers a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in exchange for a $4,750 reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs $5,225 each year, Ava is wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Analyze the effect of the two alternatives. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Click to view Percentage Credit based on Adjusted Gross Income. a. If Ava and Leo take advantage of the plan, they would v save income taxes because the reimbursement of child care expenses is excluded from v gross income. The income tax savings associated with participating in the plan would be X . In addition, Ava will save $ of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ . Therefore Ava and Leo's income taxes will be $ higher v if they do not participate in the plan. Feedback V Check My Work The credit for child and dependent care expenses mitigates the inequity felt by working taxpayers who must pay for child care services to work outside the home. This credit is a specified percentage of expenses incurred to enable the taxpayer to work or to seek employment. The credit is claimed by completing and filing Form 2441 (Credit for Child and Dependent Care Expenses). b. Assume, instead, that Ava and Leo's AGI is $24,250 and they are in the 10% tax bracket. The income tax savings associated with participating in the plan would be $ In addition, Ava will save of FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Therefore Ava and Leo's income taxes will be $ lower v if they do not participate in the plan.
Chapter6: Business Expenses
Section: Chapter Questions
Problem 61P
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Question
Transcribed Image Text:Ava and her husband, Leo, file a joint return and are in the 24% Federal income tax bracket. Ava's salary is $106,150. Her employer offers
a child and dependent care reimbursement plan that allows up to $4,750 of qualifying expenses to be reimbursed in exchange for a $4,750
reduction in the employee's salary. Because Ava and Leo have two minor children requiring child care that costs $5,225 each year, Ava is
wondering if she should sign up for the program instead of taking advantage of the credit for child and dependent care expenses. Analyze
the effect of the two alternatives.
Do not round intermediate computations. If required, round your final answers to the nearest dollar.
Click to view Percentage Credit based on Adjusted Gross Income.
a. If Ava and Leo take advantage of the plan, they would v
save income taxes because the reimbursement of child care expenses is
excluded from v
gross income. The income tax savings associated with participating in the plan would be
X . In addition, Ava will save $
of FICA taxes due to the reduction in salary.
Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $
. Therefore Ava and
Leo's income taxes will be $
higher v if they do not participate in the plan.
Feedback
V Check My Work
The credit for child and dependent care expenses mitigates the inequity felt by working taxpayers who must pay for child care services to work
outside the home. This credit is a specified percentage of expenses incurred to enable the taxpayer to work or to seek employment. The credit is
claimed by completing and filing Form 2441 (Credit for Child and Dependent Care Expenses).
b. Assume, instead, that Ava and Leo's AGI is $24,250 and they are in the 10% tax bracket.
The income tax savings associated with participating in the plan would be $
In addition, Ava will save
of FICA taxes due to the reduction in salary.
Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $
Therefore Ava and
Leo's income taxes will be $
lower v if they do not participate in the plan.
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ISBN:
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Author:
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Publisher:
CENGAGE LEARNING - CONSIGNMENT