Exercise 13-18 (LO. 4, 8) 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 $5,000 of qualifying expenses to be reimbursed in exchange for a $5,000 reduction in the employee's salary (Ava's salary is $75,000). Because Ava and Leo have two minor children requiring child care that costs $5,800 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 If required, round your intermediate computations 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 income tax savings $ 88,600 X. In addition, Ava will save s save income taxes because the reimbursement of child care expenses is associated with participating in the plan would be in FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be s Leo's income taxes will be s higher if they do not participate in the plan. . Therefore Ava and Feedback Check My Work The credit for child and dependent care expenses mitigates the inequity felt by working taxpayers who must pay for child care services to war outside the home. This credit is a specified percentage of expenses incurred to enable the taxpayer to work or to seek employment. The credi daimed by completing and filing Form 2441 (Credit for Child and Dependent Care Expenses). b. Assume, instead, that Ava and Leo's AG is $25,000 and they are in the 10% tax bracket. The associated with participating in the plan would be 5 . In addition, Ava will save SL in FICA taxes due to the reduction in salary. Alternatively, if Ava does not take advantage of the plan, their child and dependent tax credit will be s Leo's income taxes will be $ if they do not participate in the plan. . Therefore Ava and Feedback Check My Work