The taxpayer's marginal tax bracket is 25%. which would the taxpayer prefer?

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14 June, 02:53

The taxpayer's marginal tax bracket is 25%. which would the taxpayer prefer?

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Lucia Chambers · Answer 1

The taxpayer would prefer a $1.40 of taxable income rather than a $1.00 tax-exempt income. The explanation behind this is the $1.40 of taxable income is greater and better after tax compared to the $1.00 in taxable income. It is computed by [ (1-.25) ($1.40) = $1.05.