Cafeteria Plan. Jangyoun 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 $9,000 and child
care that costs $2,600. Assume Jangyoun is in the 32 % tax bracket.
a. How much income tax will Jangyoun 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.
b. Would you recommend that Jangyoun participate in the
employer’s health insurance plan if his wife’s employer already provides
comparab le health insurance coverage for the family?
c. Would you recommend that Jangyoun participate in the
employer-provided child care option if he has the alternative option of
claiming a child care credit of $480?
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