Personal Finance Chapter 1-4

When is the tax deadline?

April 15th

does a maximum security document belong in a home file (T or F)

False

value of items own - items owed = _______

net worth

________________________ is the use of illegal actions to reduce your taxes, where as ________________________ is the use of legitimate methods to reduce one's taxes.

tax evasion; tax avoidance

Jacob contributed $2,200 to charity within this past year, which qualifies for a tax deduction. Tucker saved $2,200 with a tax credit within this past year. Assume both Jacob and Tucker are in a 20% tax bracket. What is the difference between Tucker's tax credit and Jacob's tax deduction? 1. $2,200 2. $1,760 3. $880 4. $440 5. $0

$1,760

Grace saved $3,000 by using a tax credit. Assume Grace is in a 25% tax bracket. What is the amount of her tax credit? 1. $660 2. $1,500 3. $2,340 4. $3,000 5. $330

$3,000

Dean initially invested $3,150 in a company and has held this investment for four years. Dean sold the investment after four years for $5,575. Assuming he is in the 25% tax bracket, what is his capital gains tax? 1. $836.25 2. $787.50 3. $606.25 4. $472.50 5. $363.75

$363.75

Mikey initially invested $2,400 in a company and has held this investment for 3 years. He sold the investment after 3 years for $4,950. Assuming he is in the 39.6% tax bracket, what is his tax savings with capital gains rates? 1. $316.80 2. $480.00 3. $499.80 4. $510.00 5. $1,009.80

$499.80

Retirees also have varying amounts of social security that is taxed based upon the amount of their income. In some cases, the difference can vary between _____ and _____ being taxed.

50%; 85%

Preston is currently self-employed and owns Financial Planning by Preston. He currently can contribute 20% of his business income into his retirement account. Which of the following retirement plans does he most likely have? 1. 401(K) 2. Deficit 3. Individual Retirement Accounts (IRA's) 4. Keogh Plan 5. Roth Individual Retirement Plans (Roth IRA)

Keogh Plan

Investments held for less than one year will be taxed at ___________________________, whereas investments that have been held for over one year are taxed at ____________________________.

Ordinary income rates; capital gains rates

What are SMART goals?

Specific, Measurable, Attainable, Realistic, Timely

what is the biggest advantage for the Coverdell over the 529 plans when examining education plans? 1. The education expenses that the Coverdell can cover range from K - 12 through college or post secondary education. 2. The education expenses that the 529 plans can cover range from K - 12 through college or post secondary education. 3. The education expenses are always cheaper with the Coverdell plan. 4. There are more annual limits for contributions under the 529 plan. 5. There are more income limits for qualifying to make contributions under the 529 plan.

The education expenses that the Coverdell can cover range from K - 12 through college or post secondary education.

what is (are) the main goal(s) of tax planning relating to retirement and education planning? 1. To provide essential resources for specific events in the future. 2. To lower income during high tax bracket times and shift some income to low tax bracket times. 3. To calculate the income necessary to fulfill minimum living requirements. 4. To provide essential resources for specific events in the future and To lower income during high tax bracket times and shift some income to low tax bracket times. 5. To provide essential resources for specific events in the future and To calculate the income necessary to fulfill minimum living requirements.

To provide essential resources for specific events in the future and To lower income during high tax bracket times and shift some income to low tax bracket times.

Mark is divorced from his wife Sharon. Mark pays alimony to Sharon and ____________ this amount on his tax return. If Mark paid child support, he could ___________ this amount on his tax return.

can deduct; not deduct

which of the following is not an example of tax credits? 1. child tax credits 2. large family credits 3. foreign tax credits 4. residential energy credits 5. education credits

large family credits