Mr King is employed as a plumber by MBV Services This year M

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.

Solution

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