Claire currently makes $30,000 per year and is in a 15% tax bracket.If she contributes $1,800 to her 401(k)plan at work,by how much will this lower her tax liability?

Question

Quizplus · Accepted Answer

Contributions to a 401(k) plan are made with pre-tax dollars, meaning they reduce taxable income. In this case, Claire's taxable income is reduced by $1,800.

To calculate the tax savings, we multiply the contribution amount by her tax rate:

$1,800 x 0.15 = $270

So contributing $1,800 to her 401(k) plan will lower Claire's tax liability by $270.

Claire Currently Makes $30,000 Per Year and Is in a 15