Jake invested $800 in an IRA.If he has a 15% 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

Since the contribution is tax deductible, Jake's taxable income will decrease by $800. Therefore, he will be taxed on $800 less income, resulting in a tax savings of $120 (15% of $800).

Jake Invested $800 in an IRA