Rita recently completed her educational requirements to become a dental hygienist. She has been offered jobs in two different cities and is close to determining which one she should accept. Both employers offer similar benefits and working conditions, but the jobs are in two different states. Rita will move to the state in which she accepts a position.

The first position is in Pennsylvania. Rita would earn $50,000 a year, and she could purchase a starter duplex in the older part of the city for about $75,000.

Property taxes equal about 3.5% of assessed value. Assessed value is normally 85% of market value. The state sales tax rate is 6% but does not apply to clothing or food among other items. State income taxes average 3%.

The other position is in Maryland. Rita would earn $65,000 a year, but a starter duplex would cost her at least $135,000. In that area, property taxes average about 4% of assessed value, and values are typically assessed at 60% of market value. The state sales tax is generally considered to be about 1% higher than in Pennsylvania because it applies to clothing as well as other purchases. Additionally, state income taxes average 1.75% higher in Maryland than in Pennsylvania.

• 1. What would be the difference in cost of living between the two locations based only on the differences in sales tax, income tax, and property tax? Assume $24,000 of taxable purchases for this exercise.

  Tax	Pennsylvania	Maryland	Difference
  Property
  State Sales
  State Income

• 2. Using your answers from Exercise 1, what percentage of the difference in annual salaries does this additional cost represent? In addition, which of these different taxes would be tax deductible if Rita itemizes deductions on her federal tax return?

• 3. Rita receives a new job offer from the clinic in Pennsylvania that includes a 10% signing bonus, based on her expected first-year income. Compute the federal income taxes due for both states. In Pennsylvania, use her new total income along with a standard deduction of $6,300; in Maryland, use her income of $65,000 but with itemized deductions totaling $8,100.

• 4. Based on the new job offer in Pennsylvania that includes the signing bonus and your answers to Exercises 13, which job would you recommend that Rita accept, and why?

I mainly need help on 3 and 4.