Dave and Tammy are both employed but are eligible to contribute to a traditional IRA. If they each contribute $5,500 to their respective accounts, how much federal income tax will they save if they are in the 32% marginal tax bracket?

Question

Quizplus · Accepted Answer

Contributions to a traditional IRA are tax-deductible, reducing taxable income. With a 32% tax bracket, the tax savings for a $5,500 contribution each would be $5,500 * 32% = $1,760 per person. For both, it's $1,760 * 2 = $3,520.

Dave and Tammy Are Both Employed but Are Eligible to Contribute