Jake invested $800 in an IRA.If he has a 15 percent marginal tax rate and the contribution is tax deductible,Jake will
A)pay $120 more in taxes.
B)pay $120 less in taxes.
C)receive no change to his tax liability.
D)have $800 more in adjusted gross income.

Question

Quizplus · Accepted Answer

If Jake's IRA contribution is tax deductible, it will reduce his taxable income by $800, which will result in a tax savings of $120 (15% of $800). Therefore, Jake will pay $120 less in taxes.

Jake Invested $800 in an IRA