The Calico Corporation pays taxes at the marginal rate of 34%. It recently purchased a new piece of equipment that allows the firm to deduct an annual depreciation expense $30,000.
What is the tax savings associated with this depreciation expense? (That is, how much does
Calico save in taxes because it can write off this expense and reduce its taxable income?)

Question

Quizplus · Accepted Answer

The tax savings from the depreciation expense is calculated by multiplying the depreciation expense by the marginal tax rate: $30,000 * 0.34 = $10,200.

The Calico Corporation Pays Taxes at the Marginal Rate of 34