Exercise 13-20 (Algorithmic) (LO. 4, 8) Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2018. Ava's employer offers a child and dependent care reimbursement plan that allows up to $5,150 of qualifying expenses to be reimbursed in exchange for a $5,150 reduction in the employee's salary (Ava's salary is $120,500). Because Ava and Leo have two minor children requiring child care that costs $5,665 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. Ignore the impact of FICA taxes. 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 excluded from gross income. The tax savings save income taxes because the reimbursement of child care expenses is associated with participating in the plan would be $[ Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Leo's income taxes will be $ higher if they do not participate in the plan. b. Assume, instead, that Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket. The tax savings associated with participating in the plan would be $ Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Leo's income taxes will be $ if they do not participate in the plan. lower Therefore Ava and Therefore Ava and
Exercise 13-20 (Algorithmic) (LO. 4, 8) Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2018. Ava's employer offers a child and dependent care reimbursement plan that allows up to $5,150 of qualifying expenses to be reimbursed in exchange for a $5,150 reduction in the employee's salary (Ava's salary is $120,500). Because Ava and Leo have two minor children requiring child care that costs $5,665 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. Ignore the impact of FICA taxes. 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 excluded from gross income. The tax savings save income taxes because the reimbursement of child care expenses is associated with participating in the plan would be $[ Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Leo's income taxes will be $ higher if they do not participate in the plan. b. Assume, instead, that Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket. The tax savings associated with participating in the plan would be $ Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $ Leo's income taxes will be $ if they do not participate in the plan. lower Therefore Ava and Therefore Ava and
Chapter13: Tax Credits And Payment Procedures
Section: Chapter Questions
Problem 30P
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Transcribed Image Text:Exercise 13-20 (Algorithmic) (LO. 4, 8)
Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2018. Ava's employer offers a child and dependent care
reimbursement plan that allows up to $5,150 of qualifying expenses to be reimbursed in exchange for a $5,150 reduction in the employee's
salary (Ava's salary is $120,500). Because Ava and Leo have two minor children requiring child care that costs $5,665 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.
Ignore the impact of FICA taxes. 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
excluded from gross income. The tax savings
save income taxes because the reimbursement of child care expenses is
associated with participating in the plan would be $
Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $
Leo's income taxes will be $
higher if they do not participate in the plan.
b. Assume, instead, that Ava and Leo's AGI is $24,750 and they are in the 10% tax bracket.
The tax savings associated with participating in the plan would be $
Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be $
Leo's income taxes will be $
if they do not participate in the plan.
lower
. Therefore Ava and
Therefore Ava and
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