Nitai, who is single and has no dependents, was planning on spending the weekend repairing his car. On Friday, Nitai’s employer called and offered him $500 in overtime pay if he would agree to work over the weekend. Nitai could get his car repaired over the weekend at Autofix for $400. If Nitai works over the weekend, he will have to pay the $400 to have his car repaired but he will earn $500. Assume Nitai pays tax at a flat 12 percent rate.
a. Strictly considering tax factors, should Nitai work or repair his car if the $400 he must pay to have his car fixed is not deductible?
b. Strictly considering tax factors, should Nitai work or repair his car if the $400 he must pay to have his car fixed is deductible for AGI?