Question

Question 1 of 10 Elly and Frank are a married couple whose combined salaries equal $150,000 per year. Based on the tax table below, how much do they need to contribute to their IRA in order to fall in a tax bracket lower than the one they are currently in? Taxable income is over $0 Single But not over 8,350 8,350 33,950 33,950 82,250 82,250 171,550 171,550 372,950 Bracket 10% 25% 28% 33% Married Filing Jointly Taxable income is over But not $0 over 16,700 16,700 67,900 67,900 137,050 137,050 208,850 208,850 372,950 Bracket 10% 15% 25% 28% 33%

A: 15,000
B: 12,950
C: 14,000
D: 16,050​

Answer 1

B. 12,950

Explanation:

You want to know how much must be contributed to an IRA to bring a taxable income of $150,000 down to the next lower tax bracket.

Tax brackets

The boundaries for the various tax brackets lower than $150,000 are ...

• 137,050
• 67,900
• 16,700

The upper boundary for the next lower tax bracket is $137,050. Contributing to the IRA reduces taxable income by the amount contributed, so Elly and Frank want to contribute enough to reduce their taxable income to $137,050 (or below).

They need to contribute ...

$150,000 -137,050 = $12,950

to their IRA.

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