Personal Finance 1st Edition by Jack R. Kapoor

Exercise 12

1 How does tax-exempt income differ from tax-deferred income?

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2 What information is needed to compute taxable income?

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3 When would you use the standard deduction instead of itemized deductions?

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4 What is the difference between your marginal tax rate and your average tax rate?

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5 How does a tax credit affect the amount owed for federal income tax?

Action Application Using library resources or an Internet search, determine the types of income that are exempt from federal income tax.

Step 1 of 5

(1) Tax-exempt income is not subject to taxation whereas Tax-deferred income is income that will be taxed at a later date.