Ms. Teague incurred a $35,000 expense. If her marginal tax rate is 20%, which of the following statements is true?

Question

Quizplus · Accepted Answer

If the expense is deductible, Ms. Teague's after-tax cost is calculated by multiplying the expense by (1-marginal tax rate). Therefore, Ms. Teague's after-tax cost is $35,000 x (1-20%) = $28,000. Choice A is incorrect because the after-tax cost is not zero even if the expense is nondeductible. Choice C is incorrect because it assumes only a portion of the expense is deductible, which is not stated in the question. Choice D is incorrect because statement A is false.

Ms Teague Incurred a $35,000 Expense