Kelly sells life insurance and is considering buying a $60,000 mercedes for business purposes (thus, the expense reduces her taxable income). if kelly is in the 40 percent marginal tax bracket, how much after-tax income will she have to give up in order to enjoy the mercedes?

Question

Hamza Salas

Business

13 December, 22:09

Kelly sells life insurance and is considering buying a $60,000 mercedes for business purposes (thus, the expense reduces her taxable income). if kelly is in the 40 percent marginal tax bracket, how much after-tax income will she have to give up in order to enjoy the mercedes?

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Doyle · Answer 1

Tax is calculated using the formula:

Tax amount = (% Tax)

After-tax income can be calculated using the formula:

After-tax income = (1 - %tax / 100) * Income

We are given that:

% tax = 40%

Say for the income, this is only the amount needed for the Mercedes so, Income = $60,000

After-tax income = (1 - 40 / 100) * $60,000

After-tax income = $36,000