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Basics Beginner:
The Basics of Tax Planning
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Choose wisely. There is only one correct answer to each question.
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1.
What kind of retirement planning contributions can help you save money on filing your taxes currently?
Choose wisely. There is only one correct answer.
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.
2.
You can lawfully hire your child to work for you or your company, and his or her earnings will be taxed at the child's rate, not yours.
Choose wisely. There is only one correct answer.
True
False
True. Your child's tax rate on earned income for work done is likely to be lower than yours.
3.
Tax-deductible education expenses include only amounts paid for tuition and fees at an accredited college or university.
Choose wisely. There is only one correct answer.
True
False
False. Tuition at an accredited vocational school is also a qualified education expense.
4.
Which of the following is true regarding tax credits?
Choose wisely. There is only one correct answer.
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.
5.
Which of the following is a good tax-saving strategy?
Choose wisely. There is only one correct answer.
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.
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