Ava and her husband, Leo, file a joint return and are in the 24% tax bracket in 2019. Ava's employer offers a child and dependent care reimbursement plan that allows up to $4,850 of qualifying expenses to be reimbursed in exchange for a $4,850 reduction in the employee's salary (Ava's salary is $102,050). Because Ava and Leo have two minor children requiring child care that costs $5,335 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.

a.If Ava and Leo take advantage of the plan, they (would, would not) save income taxes because the reimbursement of child care expenses is (included in, excluded from)gross income.

• The (income tax savings, additional taxes)associated with participating in the plan would be how much?
• In addition, how much in FICA taxes will Ava save due to the reduction in salary?
• Alternatively, how much will their child and dependent tax credit be if Ava doesnottake advantage of the plan?
• Will Ava and Leo's child and dependent tax credit be higher or lower if they donotparticipate in the plan?

b.Assume, instead, that Ava and Leo's AGI is $25,000 and they are in the 10% tax bracket.

• The (income tax savings, additional taxes) associated with participating in the plan would be how much?
• In addition, how much of FICA taxes will Ava save due to the reduction in salary?
• Alternatively, how much will their child and dependent tax credit be if Ava doesnottake advantage of the plan?
• Will Ava and Leo's child and dependent tax credit be higher or lower if they donotparticipate in the plan?