A taxpayer in the 24% marginal tax bracket invests $1,000 of after-tax dollars at 10% interest before taxes.At the end of year one,the taxpayer will have accumulated after-tax dollars of $1,076.

Question

Quizplus · Accepted Answer

The investment is made with after-tax dollars, so the initial $1,000 investment is not subject to any further taxes. After one year at 10% interest, the investment will have grown to $1,100 before taxes. The taxpayer will owe 24% of this amount in taxes, leaving them with after-tax dollars of $1,076. Therefore, the statement is true.

A Taxpayer in the 24% Marginal Tax Bracket Invests $1,000