Rachel receives employer-provided health insurance. The employer's cost of the health insurance is $6,400 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 21 percent andthe employer is profitable?

Question

Quizplus · Accepted Answer

The employer's after-tax cost would be the cost of the health insurance minus the amount saved due to the tax deduction. The amount saved due to the tax deduction is calculated by multiplying the cost of the health insurance by the marginal tax rate.

Amount saved = $6,400 x 0.21 = $1,344

Therefore, the employer's after-tax cost is:

After-tax cost = $6,400 - $1,344 = $5,056

So, the best choice is C.

Rachel Receives Employer-Provided Health Insurance