Terrence is in the 30% tax bracket. What is the after-tax cost of a $3,000 contribution to his traditional IRA account?
A) $900
B) $1,440
C) $2,100
D) zero

Question

Quizplus · Accepted Answer

Contributions to a traditional IRA create a tax shelter in the same year the contribution is made. The taxes on the $3,000 would have been $900 ($3,000 × 30%). Therefore, the after-tax cost of the $3,000 contribution is $2,100 ($3,000 - $900).

Terrence Is in the 30% Tax Bracket