If your adjusted gross income is $30,000 and you contribute $3,000 to a retirement plan in pretax dollars, then you will pay income tax on a recomputed adjusted gross income of

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Contributions to a retirement plan in pretax dollars reduce your adjusted gross income by the amount of the contribution. Therefore, if you contribute $3,000 to a retirement plan, your adjusted gross income would be reduced from $30,000 to $27,000, and you would pay income tax on the reduced amount.

If Your Adjusted Gross Income Is $30,000 and You Contribute