Question

Christopher is a self-employed cash-method, calendar-year taxpayer, and he made the following cash payments related to his business this year. Calculate the after-tax cost of each payment assuming Christopher has a 37 percent marginal tax ra

Answer 1

a. The After-tax cost is $1,080 because this cost is not deductible

b. Municipal bonds provide returns that are tax deductible which means that half of of this interest will be tax deductible.

After-tax cost = 465 - (465 *0.5 * 37%)

= $379

c. Office supplies are full deductible for tax reasons so after-tax cost is;

= 965 * ( 1 - 37%)

= $608

d. The work boots are not deductible so the after-tax cost is the same as the cost of $675.