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1.
How does a contribution to a traditional IRA provide income tax savings?
Within limits, the contribution is deducted from your taxable income. An IRA contribution is an adjustment to income and thereby provides significant tax savings.
2.
Which of the following is true regarding tax credits?
A tax credit reduces the actual tax you owe. Within limits, a dollar of credit reduces your tax by a dollar.
3.
The kiddie tax is a term that applies to what type of income?
Unearned income received by people under a certain age. The kiddie tax applies to investment income and other types of unearned income.
4.
When you take time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.
True. When you take the time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.
5.
Which of the following is a good tax-saving strategy?
Holding an asset for more than one year before selling it at a gain. This results in a lower long-term capital gain rate.