The Basics

Question 1

What type of tax rates apply in the US?

Answer 1

Graduated, progressive, marginal taxes between 10 and 37%.

• Graduated: Depends on your income level.
• Progressive: The higher your income, the higher the tax.
• Marginal: Only the income above the certain amount is taxed at the higher rate.

Question 2

What are the two axes of the tax table?

Answer 2

Your taxable income and your filing status.

Question 3

What are the four filing statuses?

Answer 3

1. Unmarried
2. Married, filing separately
3. Married, filing jointly
4. Head of household
   
   1. Unmarried AND
   2. providing over half of the support for the taxable year for one or more dependents.

Question 4

How do you know if you are married?

Answer 4

If you are married on December 31.

Question 5

What is the formula for your taxable income?

Answer 5

Gross income

• Above-the-line deductions

= Adjusted gross income

• EITHER standard deduction OR itemized deduction
• Qualified business income deduction

= Taxable income

• Tax credits

= What you owe.

Question 6

What does above-the-line deduction and below-the-line deduction mean?

Answer 6

Above the line is what you subtract from your gross income to get to your Adjusted Gross Income.

Below the line is what you subtract from your Adjusted Gross Income to get to your Taxable Income.

Question 7

What are some examples of tax credits?

Answer 7

• Wages withheld from your paycheck over the course of the year
• Earned income tax credit (if you earn little enough)
• Adoption assistance credits
• Education credits