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johno6
New Member

If i owe $5,000 in federal tax and if I buy a $6,500 ira or a roth ira will this lower my federal tax?

I asked a question about a regular ira if i buy a $6,500 ira will i reduce my tax liability?

1 Reply
jerry2000
Alumni

If i owe $5,000 in federal tax and if I buy a $6,500 ira or a roth ira will this lower my federal tax?

A ROTH IRA contribution is not deductible, so that kind of contribution would have no effect on your tax. Only a deductible contribution to a Traditional IRA would reduce your tax. Such a contribution would reduce your tax by, at most, the amount of the contribution times your marginal tax rate. For example, if you are in the 25% marginal tax bracket, a $1,000 contribution would reduce your tax by at most $250.

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