Question

Suppose a student is in the​ 10% tax bracket. Once he begins​ college, he can choose a ​$3200 deduction or a ​$1000 credit to offset tuition and fees. Which option will reduce his tax bill by the greater​ amount? What is the difference in his savings between the two​ options?

Answer 1

To establish the scheme that will reduce the tax Bill, we will proceed as follows;
amount deductible in option one will be:
10/100×3200
=$320
amount deductible in option two will be:
10/100×1000
=$100
Option 2 will reduce his tax.
The amount of taxed will be reduced by (320-100)=$220

b] The difference between his savings will be:

difference=option1-option2
=3200-1000
=$2200