Question

Tony and Liz Montey both work for XYZ Corporation where Tony earns $32,000 and Liz earns $31,000. However, XYZ Corporation does not have a retirement plan for their employees. Tony and Liz have three-year old twin daughters named Trisha and Tasha. The following is information related to their taxes for the current tax year:

Gross income $63,000
Tony's Traditional IRA contribution $1,000
Liz's Traditional IRA contribution $2,000
Total itemized deductions $16,200
Child Credit per child $1,000
Personal exemptions $3,950 each
Standard deduction $12,400
Marginal tax rate 15 percent
NARREND
​Refer to Figure 4-1. Approximately how much will Tony and Liz save in taxes as a result of their IRA contributions?
a. ​$3,000
b. ​$150
c. ​$1,000
d. ​$450

Answer 1

correct option is d. ​$450

Step-by-step explanation:

given data

Tony earns = $32,000

Liz earns = $31,000

Gross income = $63,000

Tony IRA contribution = $1,000

Liz IRA contribution = $2,000

solution

as we know that IRA limit is $6500

so they will get benefit here on = $1000 + $2000 = $3000

so benefit = $3000 × 15 %

benefit = $3000 × 0.15

benefit = $450

so correct option is d. ​$450