Basics Beginner: The Basics of Tax Planning

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Tax-deductible education expenses include only amounts paid for tuition and fees at an accredited college or university.

True

False

False. Tuition at an accredited vocational school is also a qualified education expense.

Which of the following is a good tax-saving strategy?

Selling an asset as quickly as possible for maximum gain

Postponing the payment of operating expenses such as rent, so more deductions can be squeezed into the next tax year

Holding an asset for more than one year before selling it at a gain

Holding an asset for more than one year before selling it at a gain. This results in a lower long-term capital gain rate.

Which of the following statements are true?

A "regular" C corporation is not a tax-paying entity.

A "pass-through" business entity (e.g., a limited liability company) generally pays no tax itself.

A "pass-through " business entity pays tax that is passed through to the business owners.

All the above are true

A "pass-through" business entity (e.g., a limited liability company) generally pays no tax itself. The income passes through to the business owners, who pay tax at their own rate potentially after applying a special deduction first.

Tax considerations will be the paramount factor in any smart business person's or investor's financial decision-making process.

True

False

False. Tax considerations are important, of course, but should not drive the decision-making process.

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

An HSA

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.