Willy Wise participates in his employers 401(k) retirement plan and contributes $4000 in the course of the year out of his $60,000 income. (His employer matches Willy's contribution.) Willy's contributions are tax deductible (i.e., deducted from his taxable income) and he is in the 25% federal tax bracket. How much less does Willy pay in federal income taxes compared to a co-worker who makes the same salary but does not participate in the 401(k) plan?

$500

$1000

$2000

$3000

$4000