Homework Answers
Answer is a or e.
The maximum tax benefit can be lesser of 25% of employee contribution of $57,000 whichever is lower.
Hence the additional deduction from income would be = Contribution = Total Salary * 8%
= 350,000*8% = $28,000
The employer and employee would contribute equally, hence total Contribution is $56,000.
Applying tax rate on the same, the appropriate tax saving can be obtained.
The same would be around $19,125 if we apply 34% tax rate.
Any other tax rate would give us a lower answer.
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