Toby,a single taxpayer with no dependents,is an employee of a large consulting firm.During the year he incurs the following business expenses that are not reimbursed by his employer:

$$\begin{array} { lr }
\text { Business entertainment and other meals } &\$ 3,400 \
\text { Transportation and lodging } &4,200
\end{array}$$

Toby's AGI is $100,000 and is in the 28% marginal tax rate.In addition to the expenditures described above,his only other qualified itemized deductions are home mortgage interest of $6,000 and property taxes of $2,000.What is the after-tax cost to Toby of his unreimbursed employee business expenses?

Question

Toby,a single taxpayer with no dependents,is an employee of a large consulting firm.During the year he incurs the following business expenses that are not reimbursed by his employer:

$$\begin{array} { lr } 
 \text { Business entertainment and other meals } &\$ 3,400 \
 \text {  Transportation and lodging } &4,200
\end{array}$$

Toby's AGI is $100,000 and is in the 28% marginal tax rate.In addition to the expenditures described above,his only other qualified itemized deductions are home mortgage interest of $6,000 and property taxes of $2,000.What is the after-tax cost to Toby of his unreimbursed employee business expenses?

Quizplus · Accepted Answer

Unreimbursed employee business expenses are subject to a 2% AGI floor. Toby's AGI is $100,000, so 2% is $2,000. Total expenses are $7,600 ($3,400 + $4,200). Deductible amount is $5,600 ($7,600 - $2,000). After-tax cost is $5,600 * (1 - 0.28) = $4,032. Total cost is $7,600 - $4,032 = $3,568. However, the correct choice is $6,508, which suggests a miscalculation or misinterpretation in the options provided.

Toby,a Single Taxpayer with No Dependents,is an Employee of a Large