Exam 4: Tax Planning and Strategies

A tax system in which tax rates increase as income increases is called a(n)________ system.

Katarina and Richard are a busy young couple with a son, Caleb, who is 6 and twin daughters, Stacy and Casey, who are actively exploring the world as four-year-olds. Before the twins were born, Katarina and Richard bought their first home with plenty of indoor and outdoor space for a growing young family. The Bajorshiks are concerned about their 2014 tax issues, but they are also committed to planning for the future of their family. Next year Richard should be able to pay off the remaining balance of his law school student loans. Contributing to Richard's Roth IRA is an annual priority. The following information reflects tax year 2014. Gross income $98,712 Student loan interest $1,965 Richard's traditional IRA $1,500 Total itemized deductions $12,000 Standard deduction for 2014 $12,400 Personal exemption amount $3,950 Marginal tax bracket 25% -What is Richard and Katarina's taxable income?

The Lifetime Learning tax credit is designed to help all taxpayers get at least a two-year degree.

Samuel Ahn recently graduated from college and started working in a promising career field. He has a little money invested in a stock that pays no dividends. He lives in an apartment, is single, and has no dependents. He has a $22,000 student loan balance and he paid $800 interest in 2014. He is considering going back to school part-time for some additional computer classes. He does not have a personal IRA, and he contributed 2 percent of his $39,500 salary to his employer's 401(k) plan in 2014. As he completes his tax return for 2014, use the information above and below to help him answer the following questions. Standard deduction for 2014: $6,200 Personal exemption for 2014: $3,950 Tax brackets for 2014: Taxable income range Tax rate Up to $9,075 10 percent More than $9,075 but under $36,900 15 percent More than $36,900 but under $89,350 25 percent -Samuel's average tax rate for 2014 is closest to which of the following?

Gross income is another name for ________ income.

Your base income tax liability can be determined by

Form 1040EZ is aimed at those who have no dependents,whose taxable income is more than $100,000 per year,and who don't itemize their deductions.

Compared to the standard deduction,it is easier to calculate your itemized deductions.

Karen and her husband, Jeffrey, are facing a new income tax situation this year. She is a corporate accountant and Jeffrey is an engineer. Their gross salaries total $89,000. Both graduated from four-year universities five years ago and are still paying off large student loans. She is now attending school part-time to prepare for the CPA exam. The Bosteins incurred considerable expenses in the process of adopting an infant this year, and they have the ongoing expense of daycare. In January of last year they closed on their new home. Although trained as an accountant, Karen's work has not involved income tax preparation. Help them consider the following questions. -Since their taxes are becoming more complex,Jeffrey and Karen are concerned about making a mistake or getting audited.They should