Ramon Alvarez signed up for his employer’s cafeteria plan primarily because he can use the money to pay for unreimbursed medical expenses for himself and his disabled son. 

Ramon is in the 15 percent marginal tax bracket, pays Social Security payroll taxes and pays a 4 percent state income tax rate. 

How much will he save in income taxes by participating in the program this year in the amount of $3000? How much would Ramon save if he was in the 25 percent federal marginal tax bracket?

 

Answer rating: 100% (QA)

Tax sheltered 401K 401K plan has emerged as most useful and popular retirement plan s... View the full answer