Understanding Income and Taxes Quiz

What is gross income?

• The total income after taxes and deductions.

• The total income before any taxes or deductions.

• The income received from investments only.

• The income after all expenses are paid.

How do you calculate net income?

• Gross income minus taxes and deductions.

• Gross income plus taxes and deductions.

• Gross income divided by the number of months.

• Gross income multiplied by the tax rate.

Which of the following best describes a tax bracket?

• A fixed percentage of income paid as tax.

• A range of income that is taxed at a specific rate.

• The total amount of tax paid.

• The amount of tax deducted from each paycheck.

What does it mean that the U.S. has a progressive tax system?

• Everyone pays the same percentage of their income in taxes.

• Higher income earners pay a higher percentage of their income in taxes.

• Taxes decrease as income increases.

• Taxes are only paid on investment income.

If someone is in the 22% tax bracket, does all their income get taxed at 22%?

• Yes, all income is taxed at 22%.

• No, only the income within that bracket is taxed at 22%.

• No, only investment income is taxed at 22%.

• Yes, but only after deductions.

What is a tax deduction?

• An amount subtracted from your gross income to reduce taxable income.

• An amount added to your gross income to increase taxable income.

• A fixed tax rate applied to all income.

• A penalty for late tax payments.

What is a tax credit?

• An amount that reduces the amount of tax owed, dollar for dollar.

• An amount that increases the amount of tax owed.

• A percentage of income that is not taxed.

• A penalty for underreporting income.

How is the effective tax rate calculated?

• Total tax paid divided by total gross income.

• Total tax paid divided by total net income.

• Total gross income divided by total tax paid.

• Total net income divided by total tax paid.

If a person earns 50,000 and has 5,000 in deductions, what is their taxable income?

• $50,000

• $45,000

• $55,000

• $5,000

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

• Sales tax

• Federal income tax

• Property tax

• Flat tax