Question 1: Some political leaders would like to reduce the number of marginal t

Question

Question 1:

Some political leaders would like to reduce the number of marginal tax brackets, but how many federal income tax brackets are there today?

1

9

5

3

7

Question 2:

All of the following “adjustments” are commonly subtracted from a person’s total income (up to certain limits) and therefore are not included in a person’s adjusted gross income EXCEPT:

Contributions to IRAs (Individual Retirements Accounts)

Penalties for early withdrawal of savings

Mortgage interest paid

Student loan interest

Moving expenses to take a new job

Question 3:

There is an income threshold below which a person (or multi-person household) does not have to pay any federal income tax at all doesn’t even have to file a tax return. This amount, which can change a little from year to year, is not an arbitrary number. This number, which was $10,350 in 2016, represents which of the following:

Alternative minimum threshold

Poverty line

Personal exemption

Standard deduction

Personal exemption + standard deduction

Question 4:

Suppose that you are 50 years old and are involved in an accident. You have some basic health insurance, but you end up having to pay $30,000 in medical bills yourself (out of your own pocket). If your adjusted gross income if $100,000 and your itemized your deductions, how much, if anything, of your medical expenses can you include with your itemized deductions?

All $30,000

$20,000

$15,000

$10,000

$0

Explanation / Answer

Question 1

Some political leaders would like to reduce the number of marginal tax brackets, but how many federal income tax brackets are there today -

Answer- The Federal income tax has 7 brackets, 10%, 15%, 25%, 28%, 33%, 35% & 39.6%.

Question - 2

All of the following “adjustments” are commonly subtracted from a person’s total income (up to certain limits) and therefore are not included in a person’s adjusted gross income EXCEPT:

Answer – Mortgage interest paid

It is deducted as an itemized deduction on the return. But if the gross income is $109,000 or more then this deduction is not allowed.

Question - 3

There is an income threshold below which a person (or multi-person household) does not have to pay any federal income tax at all doesn’t even have to file a tax return. This amount, which can change a little from year to year, is not an arbitrary number. This number, which was $10,350 in 2016, represents which of the following:

Answer – Personal Exemption + Standard deduction

The personal exemption is $4050 and the standard deduction is $6300. Hence this number is $10,350 , then it must include both personal exemption and standard deduction.

Question 4

Suppose that you are 50 years old and are involved in an accident. You have some basic health insurance, but you end up having to pay $30,000 in medical bills yourself (out of your own pocket). If your adjusted gross income if $100,000 and your itemized your deductions, how much, if anything, of your medical expenses can you include with your itemized deductions?

Answer - $20000

Itemized deductions cannot be reduced by more than 80% .

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