Basics Beginner: The Basics of Tax Planning

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1.
Which of the following statements is true?
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Both the above are true. Postponing income and accelerating deductions are both good tax strategies.
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.
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True. Your child's tax rate on earned income for work done is likely to be lower than yours.
3.
Which of the following is true regarding tax credits?
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A tax credit reduces the actual tax you owe. Within limits, a dollar of credit reduces your tax by a dollar.
4.
Which of the following statements is true?
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Distributions from a health savings account that are used to pay qualified medical expenses are not taxed. Moreover, contributions to the HSA reduce taxable income.
5.
When you take time to engage in tax planning, you can save yourself money you would otherwise pay to the government in taxes.
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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.