Question

Mr. King is employed as a plumber by MBV Services. This year, Mr. King paid a...

Mr. King is employed as a plumber by MBV Services. This year, Mr. King paid a $225 fee to renew his state-issued plumber’s license and $1,275 for supplies that he uses on the job. In each of the following cases, compute Mr. King’s after-tax cost of these employment-related expenses.

a. Mr. King received no reimbursement from his employer. His AGI is $41,000, he itemizes deductions, and his marginal tax rate is 15 percent.

b. Mr. King received a $1,000 reimbursement from his employer. His AGI is $41,000, he takes the standard deduction, and his marginal tax rate is 15 percent.

c. Mr. King received no reimbursement from his employer. His AGI is $87,000, he itemizes deductions, and his marginal tax rate is 25 percent.

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Answer #1
a.
Particular Amount Working
Supplies used for Uses on the Job 1275
Add: License Fees 225
1500
Less: Deduction $820 ($41000*2%)
Desuction can claim $680
After Tax Employment related Expense $1,398 ($1500-($680*15%)
b.
Particular Amount Working
Supplies used for Uses on the Job 1275
Add: License Fees 225
Less: Reimbursement from Employer 1000
500
Less: Deduction $820 ($41000*2%)
Desuction can claim Nil
After Tax Employment related Expense $500
c.
Particular Amount Working
Supplies used for Uses on the Job 1275
Add: License Fees 225
1500
Less: Deduction $1,740 ($87000*2%)
Desuction can claim Nil
After Tax Employment related Expense $1,500
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