Payment of unreimbursed medical expenses

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Germaine, 22, is a single individual with no dependents who recently graduated from college. She has job offers from two firms. Germaine likes both companies equally well and has decided to base her decision on which company offers more. Details of each job offer are as follows:

Company A-Annual salary of $44,000, employer-provided health and accident insurance (employer cost: $2,400), group term life insurance coverage at twice the annual salary (premiums for $88,000 worth of coverage are $460), employer- provided day-care facility (employer's cost per dependent is $150 per month), and company-provided parking ($900 per year).

Company B-Annual salary of $46,000, a cafeteria plan under which employ- ees can choose benefits of up to 10% of annual salary or take the cash equivalent. In addition, the company has a flexible benefits plan in which employees may par- ticipate by setting aside up to 10% of annual salary per year for payment of unreimbursed medical expenses.

Explain the tax effects of the two job offers and the income Germaine can expect from each offer. Assume that she has no other income sources and that she uses the standard deduction.

Reference no: EM13991229

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