Dear Dan and Freida You asked me to estimate your after-tax income under the assumption that Dan will work only halftime next year. The $ 37,000 reduction in Dans pay will be partially offset by a $ 4,000 estimated increase in the amount Freida will earn. This net $ 33,000 reduction in salary and wages will also result in a decrease in your Kentucky income tax, Social Security tax, and Medicare tax. The net reduction in your after-tax cash flow will be approximately $22,185 . The calculations are presented below:

Cash Flow Taxable Income ($ 116,182 ) Decrease in salary and other earned income 25,560 x) Decrease in Social Security and Medicare tax 2,525 Decrease in Kentucky income tax 700 1,320 Decrease in Federal taxable income Decrease in Federal income tax 26,030 X After-tax decrease in cash flow ($ 22,185