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Your income is $10,000 over the cutoff for the next lowest tax bracket. Your average tax rate is 10%. Your marginal tax rate is 25%. You contribute $3,000 to a traditional IRA and your contribution is fully deductible, should you decide to go that way. You decide, in fact, to make this a traditional IRA. How much did your contribution actually cost you, in after-tax dollars

Respuesta :

Cricetus

Answer:

"$2,250" is the appropriate answer.

Explanation:

Given values are:

Before tax cost,

= $3000

Marginal tax rate,

= 25%

or,

= 0.25

The after tax cost of contribution will be:

= [tex]Before \ tax \ cost\times (1-Marginal \ tax \ rate)[/tex]

By putting the values, we get

= [tex]3000(1-25 \ percent)[/tex]

= [tex]3000(1-0.25)[/tex]

= [tex]3000\times 0.75[/tex]

= [tex]2250[/tex] ($)

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