Jaun plans to give $5,000 to the American Diabetes Association. Jaun's marginal tax rate is 24%. His average tax rate is 21%. Jaun, who itemizes his deductions, has an after-tax cost of the contribution of

Question

Quizplus · Accepted Answer

The after-tax cost of the contribution is the actual amount Jaun will pay after taking into account his tax savings. To calculate this, we use the formula:

After-tax cost = Contribution amount - (Contribution amount x marginal tax rate)

After-tax cost = $5,000 - ($5,000 x 0.24)

After-tax cost = $5,000 - $1,200

After-tax cost = $3,800

Therefore, the best choice is C, as it reflects the actual after-tax cost of the contribution.

Jaun Plans to Give $5,000 to the American Diabetes Association