To determine how much Elly and Frank need to contribute to their IRA in order to fall into a lower tax bracket, we need to compare their combined salary with the tax brackets for Married Filing Jointly.
Elly and Frank's combined salary is \[tex]$150,000. According to the tax table for Married Filing Jointly, the tax brackets are as follows:
- \$[/tex]0 to \[tex]$16,700 at 10%
- \$[/tex]16,700 to \[tex]$67,900 at 15%
- \$[/tex]67,900 to \[tex]$137,050 at 25%
- \$[/tex]137,050 to \[tex]$208,850 at 28%
Currently, their income of \$[/tex]150,000 places them in the 28% tax bracket, which starts at \[tex]$137,050. To move into the 25% bracket, their taxable income needs to be at most \$[/tex]137,050.
To find out how much they need to contribute to their IRA to fall into the 25% tax bracket, we find the amount by which their income exceeds \[tex]$137,050:
\( \text{Excess Amount} = \$[/tex]150,000 - \[tex]$137,050 = \$[/tex]12,950 \)
Hence, Elly and Frank need to contribute \[tex]$12,950 to their IRA. Therefore, the correct answer is:
D. \$[/tex]12,950
