Matteo, who is single and has no dependents, was planning on spending the weekend repairing his car. On Friday, Matteo’s employer called and offered him $550 in overtime pay if he would agree to work over the weekend. Matteo could get his car repaired over the weekend at Autofix for $418. If Matteo works over the weekend, he will have to pay the $418 to have his car repaired but he will earn $550. Assume Matteo pays tax at a flat 15 percent rate.
a-1. Strictly considering tax factors, should Matteo work or repair his car if the $418 he must pay to have his car fixed is not deductible?
a-2. Given the answer in a-1 above, by how much is Matteo better or worse off?
b-1. Strictly considering tax factors, should Matteo work or repair his car if the $418 he must pay to have his car fixed is deductible for AGI?
b-2. Given the answer in b-1 above, by how much is Matteo better or worse off?
