Question 1

For tax purposes,head of household refers to

Accepted Answer

Head of household refers to a single individual who is unmarried or considered unmarried for tax purposes and has dependents living with them for more than half the year. This individual can claim a higher standard deduction and may qualify for certain tax credits. The other options do not meet the criteria for head of household status.

Question 2

The tax rate on capital gains for most people is

Accepted Answer

The tax rate on capital gains is dependent on the time the asset was owned. If the asset is held for longer than one year, it qualifies for long-term capital gains tax rates, which are typically lower than the tax rate on regular income. If the asset is held for less than one year, it is subject to short-term capital gains tax rates, which are the same as the tax rate on regular income. The tax rate is not dependent on the amount of profit earned.

Question 3

____ income is subject to federal taxes.

Accepted Answer

Only taxable income is subject to federal taxes. Gross income is the total amount earned before any deductions or taxes, adjusted gross income is gross income minus certain deductions, net income is after-tax income, and take-home income is the amount received after all taxes and deductions have been withheld. Only income that is left over after deductions have been taken can be subject to taxation, which is referred to as taxable income.

Question 4

Your income tax withholding is dependent on

Accepted Answer

Income tax withholding is dependent on both the income level and the number of withholding allowances claimed on the W-4 form filed with your employer. Deductions also impact the amount of taxable income, but they are not the sole factor in determining withholding. Age and dependent status are not directly relevant to withholding calculations.

Question 5

____ would not be considered taxable income.

Accepted Answer

The answer of ____ would not be considered taxable income.
...

Question 6

Which of the following is not one of the three basic categories for individual income?

Accepted Answer

The three basic categories for individual income are active income (salary, wages, tips), passive income (rental income, limited partnership income), and portfolio income (dividends, interest, capital gains). Gross income is not a category of income but rather refers to a person's total income before any deductions or taxes are taken out.

Question 7

____ would be considered taxable income.

Accepted Answer

Alimony received is considered taxable income under U.S. tax law.

Question 8

Your take-home pay is what you are left with after subtracting withholdings from your

Accepted Answer

Your take-home pay is calculated by subtracting the withholdings (such as taxes, Social Security, and Medicare) from your gross earnings. Gross earnings refer to your total earnings before any deductions are made. Therefore, choice A is the correct answer. Choices B, C, D, and E do not accurately capture the concept of take-home pay.

Question 9

The standard deduction is a blanket deduction that depends on the taxpayers

Accepted Answer

The standard deduction amount varies based on the taxpayer's filing status, age, and vision, with higher deductions available for those who are 65 or older or blind.

Question 10

Tom sold mutual fund shares he had owned 3 years so that he could use the proceeds to return to college.Tom is in the 15% marginal tax bracket and his capital gains from this sale were $11,000.How much tax would Tom owe on those gains?

Accepted Answer

The answer of Tom sold mutual fund shares he had...

Question 11

Ben and Jack both earned $60,000 this year.Ben (age 30)is married with two children,and Jack (age 61)is single with no dependents.Which of the following is true regarding the amount of Social Security taxes they will pay?

Accepted Answer

Social Security taxes are calculated as a percentage of earned income, regardless of marital status or number of dependents. Both Ben and Jack earned the same amount of income, so they will pay the same amount of Social Security taxes. Age also does not affect the amount of Social Security taxes paid, as the tax rate remains the same until an individual reaches the maximum taxable income. Therefore, options B, C, D, and E are all incorrect.

Question 12

Murray (age 68,single)just sold his home of 35 years so that he could relocate nearer to his grandchildren.He realized a $400,000 capital gain on the home.On how much of this gain will Murray have to pay taxes?

Accepted Answer

The answer of Murray (age 68,single)just sold his home of...

Question 13

Which of the following can be adjustment(s)to gross income on the 1040 form?

Accepted Answer

All of the options listed (health insurance premiums paid by self-employed individuals, alimony paid, and moving expenses) can be adjustments to gross income on the 1040 form.

Question 14

Maria and Ed just sold their home of 20 years so that they could purchase a smaller home.They realized a $400,000 capital gain on the home.On how much of this gain will Maria and Ed have to pay taxes?

Accepted Answer

Maria and Ed can exclude up to $500,000 of capital gains from the sale of their primary residence if they file jointly, as per the IRS rules. Since their gain is $400,000, which is below the $500,000 exclusion limit, they will not have to pay taxes on this gain.

Question 15

You would typically not include ____ in your gross income.

Accepted Answer

Life insurance death benefit payments are generally not considered taxable income and are therefore not included in gross income.

Question 16

You have owned and lived in your home for 8 years.Now you have received an excellent promotion,but you will have to sell your home and move to another community.You expect to realize a capital gain of $100,000 on the home's sale.The capital gain will

Accepted Answer

The capital gain will not be taxable because the home was your principal residence for at least 2 out of the 5 years prior to the sale. This is known as the Homeownership Exemption or the Primary Residence Exclusion. As long as the gain is under the IRS limit of $250,000 for individuals or $500,000 for married couples filing jointly, the homeowner can exclude the entire gain from their taxable income.

Question 17

____ income is gross income less tax deductions and payments for insurance and retirement savings.

Accepted Answer

Take-home income is the amount of money an individual receives after all deductions, including taxes, insurance, and retirement savings, have been subtracted from their gross income.

Question 18

In 2014,the total social security tax was

Accepted Answer

The total social security tax in 2014 was 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare.

Question 19

A capital gain is the result of

Accepted Answer

A capital gain is the difference between the selling price of an asset and its purchase price. If the selling price is higher than the purchase price, it results in a capital gain. Therefore, selling an asset for more than its purchase price is the correct option.

Question 20

Diana sold mutual fund shares she had owned 4 years so that she could use the proceeds to travel across Europe with her son.Diana is in the 35% marginal tax bracket and her capital gains from this sale were $30,000.How much tax would Diana owe on those gains?

Accepted Answer

The answer of Diana sold mutual fund shares she had...

Quiz 3: Preparing Your Taxes