Bonnie's employer provides her with an annual dinner club membership costing $5,000. Her marginal tax rate is 24 percent. Her employer has a marginal tax rate of 21 percent. What is Bonnie's after-tax benefit?

Question

Quizplus · Accepted Answer

Bonnie's after-tax benefit will be the difference between the cost of the membership and the amount of taxes she saves by her employer paying for it.

Taxes saved by Bonnie = $5,000 x 0.24 = $1,200 
Taxes paid by her employer = $5,000 x 0.21 = $1,050

After-tax benefit = $5,000 - ($1,200 + $1,050) = $2,750

Therefore, Bonnie's after-tax benefit is $2,750, which is option C.

Bonnie's Employer Provides Her with an Annual Dinner Club Membership