Problem: Rick, who is single, has been offered a position as a city landscape consultant. The position pays $125,000 in cash wages. Assume Rick files single and is entitled to one personal exemption. Rick deducts the standard deduction instead of itemized deductions.
Q1) What is the amount of Rick's after-tax compensation (ignore payroll taxes)?
Q2) Suppose Rick receives a competing job offer of $120,000 in cash compensation and nontaxable (excluded) benefits worth $4,000. What is the amount of Rick's after-tax compensation for the competing offer? Which job should he take if taxes were the only concern?