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

Question

Quizplus · Accepted Answer

The cost of the Lexus is $60,000. Since the expense reduces her taxable income, she will save 40% of $60,000 in taxes, which is $24,000. Therefore, the after-tax cost is $60,000 - $24,000 = $36,000.

Shaniqua Sells Life Insurance and Is Considering Buying a $60,000