Analyze the implications of credit on two families of this


Legislation would give credit against personal income tax equal to 50 percent of child-care expenses incurred by a taxpayer (subject to a limit of $750 credit per family).

Analyze the implications of credit on two families of this state: Family #1 (in the 18 percent federal tax bracket) and Family #2 (in the 35 percent federal tax bracket), each family expends approximately $1,500 per year for child-care. Currently only State income taxes are fully deductible for federal tax purposes.If the child-care allowance were ena

a. If the child-care allowance were enacted as a credit and the state tax rate was a flat 4.0 percent, how much would state liability for each of the families change?

b. Assuming the child-care allowance is enacted as a deduction (still subject to the same $750 limit), what is the net after-tax cost of child-care expenses to each of the families?

You should consider both changes in federal and state tax liability (Hint: subtract the changes in state and federal liability from $1,500).

c. From the above computations which approach (credit or deduction) do you suppose the Child-care coalition in the state would favor? Why? Is this the same approach that the state comptroller would favor? Why or why not?

Request for Solution File

Ask an Expert for Answer!!
Financial Econometrics: Analyze the implications of credit on two families of this
Reference No:- TGS0666928

Expected delivery within 24 Hours