Exam 4: Managing Income Taxes

Maxine Marshall received $24,000 in disability payments from an insurance policy she paid for.How much of the $24,000 is included in Maxine's gross income?

The IRS says you must do what a "reasonable business person" would do to make a profit when running your own business.

A tax-exempt municipal bond is currently earning 5.4 percent interest while a similar taxable bond is earning 7.5 percent interest.Taxpayers in the ____ percent marginal tax bracket and above would benefit by investing in the tax-exempt bond.

Qualifying contributions to personal retirement accounts are subtracted as

The objective in effective tax planning is to legally reduce gross income to the lowest possible taxable income.

Adjustments are referred to as above-the-line deductions because they may be subtracted from gross income regardless of whether the taxpayer itemizes deductions or takes the standard deduction amount.

Taxpayers may claim both the child tax credit and the dependent care tax credit in the same year.

Retirement investments can easily be made with

You are legally required to include which of the following in gross income?

Taxpayers are required to pay taxes throughout the year via either payroll withholding or by paying estimated taxes.

Taxpayers with taxable incomes up to ____ can use the IRS tax tables.

The yield on a taxable money market mutual fund earning 3.0 percent is equivalent to a ____ percent yield on a tax-exempt money market fund for a taxpayer in the 28 percent marginal tax bracket.

Dave Scott's total income is $52,000,but his taxable income is only $39,625.Therefore,his tax liability is $5,763.Dave's average tax rate is approximately ____ percent.

Sandra Maxwell is a full-time student and her husband,Joel,is employed,so they take their young son,Sam,to a child care center during the day.They qualify for a 25 percent dependent care tax credit,and they are in the 15 percent marginal tax bracket.If the annual cost of the child care is $6,200,how much will it save Sandra and Joel on their income taxes?

The marginal tax rate may be the single most important concept in personal finance.

Individuals who are age 65 and older or are permanently and totally disabled may claim a nonrefundable federal tax credit.

Funds in a flexible spending account (FSA) can be accessed via an FSA debit card.

Taxable income is determined by subtracting all but which one of the following from gross income?

There are now ____ marginal tax rates for federal income taxes.

A taxpayer must purchase replacement property to avoid paying taxes on capital gains on the sale of his or her home.