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.
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.
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.
For tax year 2013 and beyond, the total Social Security and Medicare tax for self-employed individuals is 15.3%.
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.
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.
Personal FinanceThis strategy of moving your tax deductable payments and donations to the following year could mean hundreds more on your return.
Personal FinanceNot taking the standard deduction this year could save you hundreds of dollars.
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Financial AdvisorFind out about these deductions and how you can use them to lower your tax bill.
Personal FinanceThe amount of money you save by paying your mortgage off quickly will far exceed any benefit from the mortgage interest tax deduction.
Personal FinanceTaxable income is the net of gross income and allowable deductions.
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