Question 1

Buddy Slaton has only one itemized deduction item,the $3,000 he gave to his church.His standard deduction this year is $5,450,and he is in the 15% marginal tax bracket.How much will his contribution to the church save Buddy in taxes this year?

Accepted Answer

Buddy's itemized deduction ($3,000) is less than the standard deduction ($5,450), so he will take the standard deduction. Therefore, his contribution to the church will not save him any additional taxes.

Question 2

Molly and Justin are considering contributing $5,000 to their favorite,tax deductible charity.This contribution will bring their total itemized deductions to $20,000.Assuming they are in the 28% marginal tax bracket,how much will they save in taxes by contributing this $5,000 to charity?

Accepted Answer

Molly and Justin will receive a tax deduction of $5,000 for their contribution to the charity, which will bring their total itemized deductions to $20,000. Since they are in the 28% marginal tax bracket, their tax savings will be 28% of $5,000, which is $1,400. Therefore, the correct answer is C.

Question 3

Connie is a 20 year old college student who earned $8,000 and spent it all on her support during the year.Her parents may claim her as a tax dependent as long as

Accepted Answer

For parents to claim a child as a dependent, they must provide more than half of the child's support during the year.

Question 4

You purchased and lived in your home 8 years.Now you have received an excellent promotion,but you will have to sell your home and move to another community.The capital gains on the home sold will

Accepted Answer

The capital gains on the home sold will not be taxable because the home was your principal residence. According to the IRS, if you lived in your home for at least two of the past five years before selling, you can exclude up to $250,000 of capital gains from the sale if you're single, and up to $500,000 if you're married filing jointly. This exclusion applies to the sale of a principal residence, meaning the home you live in most of the time.

Question 5

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

Accepted Answer

Murray can exclude up to $250,000 of the capital gain from the sale of his primary residence under the IRS home sale exclusion rule for single filers. Therefore, he will pay taxes on $150,000 of the gain.

Question 6

The total amount that you owe for income tax in one year is your tax

Accepted Answer

Tax liability refers to the total amount of tax that an individual or business owes to the government for a particular tax year, including any penalties or interest that may have accrued. This amount is calculated based on the taxable income, deductions, and credits that apply to the taxpayer's situation. It is the ultimate financial responsibility of the taxpayer to pay their tax liability by the due date.

Question 7

If you do not wish to itemize deductions,you can use the

Accepted Answer

The standard deduction is a flat amount that reduces your taxable income, without requiring you to itemize your deductions. It simplifies the tax filing process and is often the best choice for those who don't have a significant amount of deductible expenses. The amount of the standard deduction varies depending on your filing status and is adjusted annually for inflation.

Question 8

For 2011,each personal exemption reduced taxable income by

Accepted Answer

In 2011, each personal exemption reduced taxable income by $3,700 according to the IRS guidelines for that year.

Question 9

Itemized non-business expenses do not include

Accepted Answer

Itemized non-business expenses do not include life insurance premiums.

Question 10

Mr.and Mrs.Sanborn are retired and have had several medical problems this year.Their financial matters for 2008 are as follows:  How much would the Sanborns' medical expenses contribute to their total itemized deductions?

Accepted Answer

The answer of Mr.and Mrs.Sanborn are retired and have had...

Question 11

Mr.and Mrs.Davenport have three children ages 3,6,and 13.Their financial matters for 2011 are as follows:  How much would the Davenports' medical expenses contribute to their total itemized deductions?

Accepted Answer

The answer of Mr.and Mrs.Davenport have three children ages 3,6,and...

Question 12

Tax credits reduce your

Accepted Answer

Tax credits directly reduce your tax liability, which is the total amount of taxes you owe. They do not affect your adjusted gross income, tax refund, tax withholding or taxable income.

Question 13

Which of the following cannot be adjustment(s)to gross income on the 1040 form?

Accepted Answer

The answer of Which of the following cannot be adjustment(s)to...

Question 14

Medical and dental expenses may be included as itemized deductions

Accepted Answer

Medical and dental expenses can be included as itemized deductions only in the amount that exceeds 7.5% of adjusted gross income. This threshold was reduced from 10% to 7.5% under the Tax Cuts and Jobs Act for tax years 2017 through 2020.

Question 15

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

Accepted Answer

Health insurance premiums paid by self-employed individuals can be deducted as an adjustment to gross income on line 29 of Form 1040. Alimony paid can also be deducted as an adjustment to gross income on line 31a of Form 1040. Moving expenses can be deducted as an adjustment to gross income if the move is for a job change and meets certain distance and time requirements, and is reported on Form 3903.

Question 16

John and Charlotte are considering contributing $1,000 to their church.This contribution will bring their total itemized deductions to $2,000.Assuming they are in the 15% marginal tax bracket,how much will they save in taxes by contributing this $1,000 to their church?

Accepted Answer

Their total itemized deductions of $2,000 are less than the standard deduction, so they will not itemize and will not save any taxes by contributing the $1,000.

Question 17

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...

Question 18

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

Tom's long-term capital gains are taxed at 0% if he is in the 15% marginal tax bracket, so he owes $0 in taxes on the $11,000 gain.

Question 19

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.How much of this gain will Maria and Ed have to pay taxes on?

Accepted Answer

Under the IRS rules, married couples can exclude up to $500,000 of capital gains on the sale of their primary residence if they have lived in it for at least two of the last five years. Since Maria and Ed's gain is $400,000, which is below the $500,000 exclusion limit, they will not have to pay taxes on this gain.

Question 20

Mr.and Mrs.McMurray have three children ages 3,6,and 12 for which they paid $6,000 in child care expenses this year.Assume the McMurray's tax liability is initially calculated to be $10,000.Then apply a 20% tax credit for child care expenses within limits normally allowed.How much will their final tax liability be?

Accepted Answer

The answer of Mr.and Mrs.McMurray have three children ages 3,6,and...

Quiz 3: Preparing Your Taxes