Test your knowledge

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Which of the following is true regarding tax credits?

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A tax credit reduces your taxable income as reported on Form 1040.

A tax credit reduces the actual tax you owe.

For most taxpayers, the standard tax credit will be larger and more valuable than itemizing your credits.

A tax credit reduces the actual tax you owe. Within limits, a dollar of credit reduces your tax by a dollar.

Several different tax forms that get sent to you will list the income you received during the year. Which of the following does NOT list income that you received?

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W-4

W-2

1099

All of the above list income received

W-4. Your W-4 does not list income you received. But your W-2s and any 1099s you receive will.

What kind of retirement planning contributions can help you save money on filing your taxes currently?

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A health savings account

A traditional IRA

A Roth 401(k)

A traditional IRA. Contributions to a traditional IRA can help you save money on filing your taxes currently. Roth 401(k)s cannot, and health savings accounts are not retirement plans.

Social Security is a federal _______.

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Health insurance program

Retirement income program

Disability income program

Retirement and disability income program

Retirement and disability income program.

The federal tax rate you pay will vary depending on your age.

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True

False

False. It varies depending on your filing status.

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