Question content area top

Part $1$

Keith is a married taxpayer with a dependent$4-$year$-$old daughter. His employer offers a cafeteria plan under which he can choose to receive cash$$ or$,$ alternatively, choose from certain fringe benefits. These benefits include health insurance that costs $ $10$ comma $000$ and child care that costs $ $3$ comma $100.$ Assume Keith is in the $32\%$ tax bracket.

Read the requirements.LOADING...

Question content area bottom

Part $1$

Requirement a$.$ How much income tax will Keith save if he chooses to participate in the$$ employer's health insurance$$ plan? Assume that he does not have sufficient medical expenses to itemize his deductions.

By participating in the plan, Keith would save

$.$

Part $2$

Requirement b$.$ Would you recommend that Keith participate in the$$ employer's health insurance plan if his$$ wife's employer already provides comparable health insurance coverage for the$$ family?

A$.$

Keith cannot participate in the$$ employer's health insurance plan if the family already receives comparable health insurance coverage from his$$ wife's employer.

B$.$

No$.$ The tax savings would never exceed the cost of a second medical insurance coverage.

C$.$

Yes. Having more than one health insurance coverage per family always creates an overall tax savings for the taxpayer.

D$.$

Probably not. Although there would still be a tax savings that is not sufficient reason to spend $ $10$ comma $000$ on duplicate medical insurance coverage.

Part $3$

Requirement c$.$ Would you recommend that Keith participate in the$$ employer$-$provided child care option if he has the alternative option of claiming a child care credit of $ $480?$

Participation in the employer$-$provided child care option would result in a tax saving of

Part $4$

Would you recommend that Keith participate in the$$ employer$-$provided child care option if he has the alternative option of claiming a child care credit of $ $480?$

A$.$

There is no difference between the tax savings resulting from participation in the$$ employer$-$provided child care option and the savings from claiming a child care credit of $ $480.$ Keith would have the same tax savings with either option.

B$.$

$$Yes$,$ the tax saving resulting from participation in the$$ employer$-$provided child care option is greater than the savings from claiming a child care credit of $ $480.$ Keith should participate in the$$ employer$-$provided child care option.

C$.$

$$No$,$ the tax saving resulting from participation in the$$ employer$-$provided child care option is less than the savings from claiming a child care credit of $ $480.$ Keith should not participate in the$$ employer$-$provided child care option.