Karen Wilson and Katie Smith are looking at the company’s health care options and trying to determine how much their net pay will decrease if they sign up for the qualified cafeteria plan offered by the company. Explain the calculations of taxable income when qualified health care deductions are involved. Karen, a married woman with four exemptions, earns $2,000 per biweekly payroll. Katie, a single woman with one exemption, also earns $2,000 per biweekly payroll. The biweekly employee contribution to health care that would be subject to the cafeteria plan is $100.
