Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions. a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is her cost of underestimating the expenses? b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What is her cost of overestimating her expenses? (Assume this is a "use or lose" plan).
Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions. a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is her cost of underestimating the expenses? b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What is her cost of overestimating her expenses? (Assume this is a "use or lose" plan).
Chapter5: Gross Income: Exclusions
Section: Chapter Questions
Problem 46P
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Transcribed Image Text:Rosa's employer has instituted a flexible benefits program. Rosa will use the plan to pay for her
daughter's dental expenses and other medical expenses that are not covered by health insurance. Rosa
is in the 24% marginal tax bracket and estimates that the medical and dental expenses not covered by
health insurance will be within the range of $2,000 to $3,000. Her employer's plan permits her to set
aside as much as $2,750 in the flexible benefits account. Rosa does not itemize her deductions.
a. Rosa puts $1,750 into her flexible benefits account, and her actual expenses are $2,750. What is
her cost of underestimating the expenses?
b. Rosa puts $2,750 into her flexible benefits account, and her actual expenses are only $1,750. What
is her cost of overestimating her expenses? (Assume this is a "use or lose" plan).
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