The Ultimate Tax Deductions Quiz
Estimated Completion Time
Image: TIMOTHY CLARY/AFP/Getty Images
About This Quiz
We all have to pay taxes, but we all want to keep as much of our money as possible. Knowing how to navigate the complex tax code to your benefit is not easy. Do you know which things you can deduct from your income? Take our quiz to find out what you know about the complex world of tax deductions.
Which of these statements best describes a tax deduction?
A tax deduction is a dollar amount by which you can reduce your taxable income.
A tax deduction is a dollar amount to be reduced from your taxable income. It can be a business related expense, a credit you receive for having a child, or one of many other possibilities.
A tax deduction is an amount of money sent to you by the government because you've paid to much money in taxes.
A tax deduction is a portion of your paycheck that is taken to pay for taxes.
How many Americans fail to take advantage of all the tax deductions available to them?
H&R Block, a major tax firm, reports that over 4,000,000 Americans per year pay more in taxes than they would if they deducted properly.
If you want to ensure that you declare your taxes accurately and legally, you should do which of the following?
Carefully study the U.S. Federal Tax Code.
Hire a professional accountant or tax attorney.
The American tax code is extremely intricate. Hiring an experienced professional to prepare your taxes is the best way to ensure it gets done right.
Use a well-prepared spreadsheet.
Above-the-line deductions are applied to which of these?
Your gross income is the amount of money you earn before any taxes or other fees are applied. Above the line deductions are applied to your gross income.
What is the definition of an adjusted gross income (AGI)?
Your AGI is your gross income minus your above-the-line deductions.
Your adjusted gross income (AGI) is what remains of your gross income after you've calculated all above-the-line deductions.
Your AGI is your net worth divided by your age, plus your annual salary.
Your AGI is your income after it has been adjusted for inflation.
A married couple receives a standard deduction of what amount?
One example of a standard deduction is the $10,000 deduction for married couples.
Which of these statements best describes an itemized deduction?
Itemized deductions are the deductions that only businesses can use.
Itemized deductions are deductions for college students.
Itemized deductions are expenses you may deduct from your AGI in place of standard deductions.
Rather than accept the standard deduction, some people prefer to calculate their non-taxable expenses and deduct those from their AGI. The things you're allowed to deduct are called itemized deductions.
Which of these is an example of an expense you can itemize?
Essentials like food and clothing do not qualify for itemization, but a uniform for work does.
How much of the interest on a student loan can you deduct if you're not a dependant?
If you are not declared a dependant by your parents, then you can deduct up to $2,500 of the interest they've paid on your student loan.
What percentage of the interest on your mortgage can you deduct?
You will likely be eligible to deduct all of the interest you pay on your home mortgage.
Which of these best describes which self-owned business expenses you may deduct?
You may deduct only office supplies.
You may deduct 50 percent of all of your business expenses.
You may deduct anything considered necessary to run a self-owned business.
Tax law allows you to deduct things that are "necessary and ordinary" for running a business. Examples include office supplies, health insurance, and business related travel expenses.
What are the two categories of charitable organizations?
Charitable organizations fall into two categories: public and private. What percentage of your charitable contributions you may deduct depends on what category the charity belongs to.
What percentage of your contributions to a public charity may you deduct?
You may deduct 50 percent of your donations to public charities, but only 30 percent of those to private ones.
How do find out whether your contributions to a charity are deductable?
All charity is tax-deductable.
Look in the IRS's Publication 78.
The Internal Revenue Service (IRS) has a list of all charitable organizations eligible for tax-deductible donations. Look in an IRS Publication 78 for details.
To deduct health insurance expenses from your AGI, the expenses must exceed what percentage?
Just because an expenditure qualifies as a deduction doesn't mean that 100 percent of the money is deductable. In the case of health care, only what exceeds 7.5 percent of your AGI may be deducted.
What is the approximate income cap on the earned income tax credit.
The earned income tax credit only applies to incomes below $40,000.
Which form should fill out to amend your tax deductions?
a Federal Amendment and Revision of Taxes form
Sometimes you find out about an available tax deduction after paying your taxes. You have the right to amend your taxes and claim those deduction by submitting an IRS 1040x form.
Which of these is an example of an non-itemized tax deduction?
the cost of an engagement ring
Some tax deductions do not require itemization, but are not standardized either. One example is the $1,000 child credit.
You may claim a child tax credit until your child is how old?
For purposes of a child tax credit the age of adulthood is 17.
What is the maximum you can deduct from your contributions to an Individual Retirement Account (IRA)?
An IRA allows you to save up for retirement while shielding some of your income from taxes. You may deduct up to $4,000 in annual contributions to your IRA.
Share on Facebook
Share on Facebook
TIMOTHY CLARY/AFP/Getty Images