Answer: $13,200
Explanation:
Given that,
Contributing to a traditional IRA = 7 years
Total in account = $30,000
Withdrawal from IRA to help pay for the car = $20,000
marginal tax bracket = 24 percent
Therefore,
After tax withdrawal:
= Withdraws - 10% penalty as per IRS for early withdrawal - 24% tax on $20,000
= $20,000 - 0.1 × 20,000 - 0.24 × 20,000
= $20,000 - 2,000 - 4,800
= $13,200
The correct answer is $13,200
To determine the after tax withdrawal, you should subtract the amount she withdraws from her account from the 10% penalty charges (according to the condition of the Roth IRA withdrawal) and also subtract the derived value from the marginal tax bracket of the amount she withdraw.
Therefore, if you substitute the above values, then you have:
$20,000 - 0.1 × 20,000 - 0.24 × 20,000
= $20,000 - 2,000 - 4,800
= $13,200
In Roth IRAs (individual retirement account), your age and the reason why you withdrawal from your contributions determine how much you will pay as taxes.
Also, if you are not above 59 and half years of age, you will be penalized if you withdraw from your account. Since Brooklyn is not up to the age of 59 and half, then she will have to pay a 10% penalty for withdrawing from her IRAs account.
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