Thomas contributed $2,800 to a Roth IRA. He is currently in the 25% tax bracket. How will his contribution affect his income tax for the current year?
A) It will reduce the amount of taxes he owes in the current tax year by $700.
B) It will increase the amount of taxes he owes in the current year by $700.
C) It will reduce the amount of taxes he owes in the current year by $2,100.
D) It will have no effect on the amount of taxes he owes this year.

Question

Quizplus · Accepted Answer

A contribution to a Roth IRA does not reduce taxes in the year of the contribution. The advantage of a Roth IRA is that the withdrawals are not taxed (at least as long as they occur after age 59½.)

Thomas Contributed $2,800 to a Roth IRA