Question

marissa participates in her employer's nonqualified deferred compensation plan. for 2023, she is deferring 15 percent of her $410,000 annual salary. assuming this is her only source of income and her marginal income tax rate is 32 percent, how much tax does marissa save in 2023 by deferring this income (ignore payroll taxes)?

Answer 1

Marissa will save $19,680 in taxes for the year 2023 by deferring 15 percent of her $410,000 annual salary at a marginal tax rate of 32 percent.

Step-by-step explanation:

The question involves calculating the tax savings Marissa receives by deferring 15 percent of her annual salary, given her marginal tax rate is 32 percent.

To find her deferred amount, we take 15 percent of her $410,000 salary, which is $61,500. Since she is in a 32 percent tax bracket, the tax saving for the deferred amount is 32 percent of $61,500, which equals $19,680.

This calculation assumes Marissa's deferred amount will not be taxed until it is received at a later date, hence the tax savings for the current year, 2023.