HECOL Chap 3

What is a tax deduction?

• A cost that reduces your taxable income

• A cost that increases your taxable income

• A cost that reduces your taxes directly

• A cost that increases your taxes directly

What is the effect of a $2,000 tax credit on a $10,000 tax bill?

• Net tax bill becomes $8,000

• Net tax bill becomes $12,000

• Net tax bill becomes $10,000

• Net tax bill becomes $6,000

What is the first type of tax listed under "Taxes on Purchases"?

• Sales tax

• Real estate tax

• Personal property tax

• Wealth tax

What should you do if you have to repay any of your OAS or EI benefits?

• Ignore it

• File a tax return

• Apply for a loan

• Wait for a notice

What can employees adjust by submitting a new TD1 form?

• Source withholding

• Tax credits

• Tax deductions

• Tax rates

What is required for individuals whose tax owing exceeds a certain amount in the previous year?

• Installment payments

• Lump sum payment

• Tax credit application

• Tax deduction claim

What is one way to arrange compensation to improve after-tax income?

• Take bonuses before the end of the tax year.

• Avoid employee benefits for better tax treatment.

• Deduct related expenses if paid by commission.

• Ignore tax concerns for small business owners.

What is the contribution limit for a Tax-Free Savings Account (TFSA)?

• $5,000

• $6,000

• $7,000

• $8,000

Which of the following is an example of a tax credit?

• Capital gains

• Interest on loans

• Disability amount

• Investment income

What is a technique to defer income taxation?

• Pay taxes immediately

• Defer to a later date when tax rate is higher

• Reinvest income earned during deferral tax-free

• Avoid RRSPs and IPPs