Alex works for a company with a 401(k)plan.He currently earns $80,000 in gross salary and contributes 8% of his gross salary into his 401(k)account.If his marginal tax rate is 33%,how much income tax liability is he saving by participating in his 401(k)?

Question

Quizplus · Accepted Answer

Alex contributes 8% of his gross salary, which is $80,000*0.08=$6,400.
By contributing to his 401(k), Alex's taxable income is reduced by $6,400.
Therefore, the tax liability saved is $6,400*0.33=$2,112.

Therefore, the best choice is B, $2,112.

Alex Works for a Company with a 401(k)plan