Chapter 4 videos with questions

Jacob contributed 2,200 to charity within past year, which qualifies tax deduction. Tucker saved 2,200 with a tax credit within the past year. Assume both Jacob and Tucker are in a 20% tax bracket. What is the difference between Tucker's tax credit and Jacobs tax deduction

Tax credit=tax savings=2,200 Tax deduction=tax- deductible contribution*tax rate= 2,200*.20=440 2,200-440=1760

_ is the use of illegal actions to reduce your taxes, where as_ is the use of legitimate methods to reduce ones taxes.

Tax evasion, tax avoidance

What is the biggest advantage for the cover fell over 529 plans when examining education plans?

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

Retires also have varying amounts of social security that is taxed based upon the amount on their income. In some cases the difference can vary between_ and_ being taxed.

50-85%

tax deduction

An expense that results in a reduction in taxable income on which your taxes are calculated Examples of tax deductions are Property taxes mortgage interest medical expenses charitable contributions

tax credit

Direct offset to the amount of tax paid. Dollar for dollar reduction in the amount of taxes owed

Dean initially invested 3,150 dollars 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 25% tax bracket what is his capital gains tax?

Gain on investments=selling price-initial price 5,575-3,150=2,425 Capital gains tax= gain on investment*tax rate on long term capital gains= 2,425*.15=363.75

Which of the following is not an example of tax credits?

Large family credit

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 the main goals of tax planning relating to retirement and education planning?

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

Grace saved 3,000 by using a tax credit. Asymmetric Grace is in a 25% tax bracketZ what is the amount of her tax credit?

3,000 tax credit is equal to 3,000 since the amount of taxes she saved.

Miley 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 his tax savings is it's capital gains rates?

4,950-2,490=2,550 2,550*.396=1009.80 2,550*.29=510 1,00.70-520=499.80

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

He currently can contribute 20% of business income into his retirement account. Which of the following retirement plans does he most likely have?

Kehog plan