Question

22. Teresa works as a chemistry professor at a local university. She

purchases health insurance, with a monthly premium of $332.37, and dental
insurance, with a monthly premium of $52.48, for herself and her children.
Her income level places her at the 28% federal income tax rate. Teresa
decided to have her health insurance and dental insurance premiums
deducted before taxes were calculated. What are Teresa's annual tax
savings?

Answer 1

Teresa's annual tax savings due to pre-tax deductions of her health and dental insurance premiums, based on her 28% federal income tax rate, is $1,293.10.

Step-by-step explanation:

To calculate Teresa’s annual tax savings, we need to first determine the total annual cost of her health and dental insurance premiums and then apply her 28% federal income tax rate to this amount since the deductions are made pre-tax.

The monthly health insurance premium is $332.37, and the dental insurance premium is $52.48. To get the annual costs, we multiply each by 12 (months in a year):

• Health insurance: $332.37 × 12 = $3,988.44
• Dental insurance: $52.48 × 12 = $629.76

Next, we add these annual costs together:

Total annual premium cost = $3,988.44 + $629.76 = $4,618.20

Now we apply the 28% tax rate to find the tax savings:

Tax savings = $4,618.20 × 0.28 = $1,293.10

Therefore, Teresa’s annual tax savings due to pre-tax insurance premium deductions is $1,293.10.