Accounting Fundamentals Certification (AFC) Practice Test

A $5,000 withdrawal from a Traditional IRA would most likely increase a retired couple's household taxable income. Withdrawals from a Traditional IRA are considered taxable income in the year they are taken. This means that when the couple withdraws funds from this type of account, that amount is added to their total income and can push them into a higher tax bracket or increase the amount of income on which they owe taxes.

In contrast, contributions to a Roth IRA are made with after-tax dollars, which means that they do not impact taxable income at the time of contribution or withdrawal. Withdrawals from a Roth IRA are generally tax-free, provided certain conditions are met, so they would not increase taxable income either. A contribution to a Traditional IRA might also lower taxable income, depending on various factors, such as whether they meet specific requirements for tax deductions.

Thus, the action that directly adds to taxable income is the withdrawal from the Traditional IRA, making it the clear choice in this scenario.