Question

Edna deposited $4800 into a traditional IRA that grew to $9900 at his retirement. If Alonzo is currently in the 25% tax bracket and is 75 years old, how much tax will he have to pay when he withdraws the entire $9900?

$1775
$2500
$375
$625

Answer 1

Alonzo will have to pay $2475 in taxes, which is 25% of his total withdrawal amount from his traditional IRA. This is calculated by multiplying $9900 by the tax rate of 25%.

Step-by-step explanation:

The question asks about the amount of tax that will be paid by Alonzo on his IRA withdrawal considering the 25% tax bracket. To find the tax due, we simply calculate 25% of the total amount withdrawn, which is $9900 in this case.

1. Identify the total amount withdrawn from the IRA: $9900.
2. Calculate the tax by multiplying the withdrawal amount by the tax rate: $9900 * 0.25.
3. The resulting amount is the tax Alonzo will have to pay: $2475.

Therefore, Alonzo will have to pay $2475 in taxes when he withdraws the entire $9900 from his traditional IRA at retirement.