Bob has decided to contribute $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

Contributions to a Roth IRA are made with after-tax dollars, meaning they do not reduce taxable income in the year they are made. Therefore, Bob's contribution will not affect his current year's taxes.

Bob Has Decided to Contribute $2,800 to a Roth IRA