Taxes and Functions Unit Test V2

Front

What is the standard deduction for the tax year 2023?

Back

$12,950.

Front

What are above-the-line deductions?

Back

Deductions that can be taken before calculating adjusted gross income (AGI), such as student loan interest and retirement contributions.

Front

What is the purpose of itemized deductions?

Back

To allow taxpayers to deduct specific expenses from their taxable income, potentially lowering their tax liability.

Front

How do you calculate net pay from gross pay?

Back

Net pay = Gross pay - (Tax deductions + Other deductions).

Front

What is a marginal tax rate?

Back

The tax rate applied to the last dollar of income earned, which can differ from the effective tax rate.

Front

What is the effective tax rate?

Back

The average rate at which an individual or corporation is taxed, calculated as total tax paid divided by total income.

Front

What does it mean to file a W-4 form?

Back

It allows employees to indicate their tax situation to their employer, which determines the amount of federal income tax withheld from their paycheck.

Front

What is the formula for calculating deductions?

Back

Total deductions = Above-the-line deductions + Itemized deductions or Standard deduction.

Front

What is the significance of tax brackets?

Back

Tax brackets determine the rate at which income is taxed, with higher rates applied to higher income levels.

Front

What is the difference between gross pay and net pay?

Back

Gross pay is the total earnings before deductions, while net pay is the amount received after all deductions.