1. D

All of the answers (except for D), involve investing the child's assets in tax-free or tax-deferred investments. Buying high yield bonds and dividend paying stocks in a brokerage account would create even more taxable income.

2. C

Medical expenses and charitable contributions are itemized deductions that are considered "below-the-line" deductions. Adjustments are "above-the-line" deductions taken from gross income to calculate AGI.

3. A

Tax credits are a dollar-for-dollar offset from the actual tax liability incurred, so they provide more reduced tax liability benefits than itemized deductions or adjustments to gross income.

4. B

For tax year 2013 and beyond, the total Social Security and Medicare tax for self-employed individuals is 15.3%.

5. D

A child can earn up to $950 and have no tax liability. The 25% tax rate for married filing jointly couples is taxable income of $72,501 to $146,400. All statements above are true.

6. A

Sally would qualify as Head of Household and be entitled to two personal exemptions at $3,900 each. Income phase outs could disqualify her of the child tax credit. Her standard deduction would be limited to $8,950.
 



Introduction

Related Articles
  1. Retirement

    Top Tax Tips For Retirees

    Filing your taxes during retirement can be just as time consuming as when you were employed. We have some tips to help you out.
  2. Taxes

    Top Tax Deductions Not to Overlook

    If you want to pay as little as possible in taxes, it's important to learn about all the different credits and deductions available. Here's a primer.
  3. Taxes

    Increase Your Tax Refund With Above-The-Line Deductions

    Find out about these deductions and how you can use them to lower your tax bill.
  4. Taxes

    Explaining Taxable Income

    Taxable income is the net of gross income and allowable deductions.
  5. Taxes

    Want A Bigger Tax Refund? Don't Itemize

    Six reasons why many taxpayers can save money and time by claiming the standard deduction.
  6. Taxes

    Calculating the Mortgage Interest Tax Deduction

    The amount of money you save by paying your mortgage off quickly will far exceed any benefit from the mortgage interest tax deduction.
  7. Taxes

    What's IRS Form 1040 For?

    Most U.S. taxpayers will be familiar with the 1040. By the end of filling it out, you'll know how much tax you owe, or what your refund is.
  8. Taxes

    How To Get The Most Money Back On Your Tax Return

    These tips will help you get a larger refund this year, while teaching you how to pay less taxes going forward.
  9. Taxes

    Strategies for Protecting Your Income from Taxes

    Taxes are difficult to avoid, but there are many strategies you can find to help ward them off a bit. Here are a handful of ways to protect your income.
  10. Taxes

    How To Calculate AGI For Tax Purposes

    The first step in completing your taxes is calculating your adjusted gross income. Here’s how.
Frequently Asked Questions
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The concept of CAGR is relatively straightforward and requires only three primary inputs: an investments beginning value, ...
  2. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors with insight into how efficiently a company (or more specifically, ...
  3. What is the difference between Communism and Socialism?

    Learn how some countries are incorporating socialist methods into capitalism.
  4. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ...
Trading Center