Bonita's employer has a nondiscriminatory childcare reimbursement plan (a type of flexible benefits plan). Bonita expects that her childcare expenses will total $2,000 for the current year. If she does not participate in the reimbursement plan, she will be allowed a $400 tax credit for childcare. Bonita's marginal tax rate is 25%. What are the tax effects of Bonita's alternatives?
I. Bonita will
save $2,000 by using the reimbursement plan.
II. The reimbursement plan is $100 more favorable than the tax credit for Bonita.
a. Only statement I is correct.
b. Only statement II is correct.
c. Both statements are correct.
d. Neither statement is correct.
b
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