Trisha Is Married and Has Young Children

question 83

Multiple Choice

Trisha is married and has young children.The couple is in the 39.6% tax bracket.In order for Trisha and her husband to work,they pay $5,000 for daycare which earns them a $1,000 dependent care credit.Trisha has been offered a new job.The new job will pay a $5,000 lower salary,but the new employer will offer $5,000 of paid child care.Trisha cannot claim the dependent care credit if she receives employer-paid child care.Which of the following statements is correct? (Ignore payroll taxes. )

• A)Trisha will have $980 additional after-tax income if she accepts the new job.
• B)Trisha will lose $4,000 net value if she accepts the new job.
• C)Trisha will have $1,980 additional after-tax income if she accepts the new job.
• D)Trisha will lose $3,020 of net value if she accepts the new job.

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Definitions:

Gross Earnings

The total amount of revenue or income earned by an individual or business before any deductions or taxes are applied.

Net Pay

The amount of money an employee takes home after deductions like taxes and retirement contributions have been subtracted.

FICA Tax

A mandatory tax used to fund the United States Social Security and Medicare programs, deducted from the wages of employees.

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.