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Thursday, March 29, 2012

TEST YOURSELF ON TAX DEDUCTIONS

5:38 PM | Posted by pensionfinancialservices | | Edit Post

 

"What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin"--Mark Twain

Come April 15 (or sometime later if you've asked for an extension), whether you get skinned or not may depend on that little matter called deductions.

When it comes to income tax returns, our experts have deduced this: some of us are pretty savvy about knowing the rules for allowable deductions, but too many of us aren't. "But for those in the latter category, don't get too down on yourself," says Pension Parameters Financial Services President Kevin F. McCormack. "After all, no less a filer than Albert Einstein once said, 'The hardest thing in the world to understand is the Income Tax'."

So it's not surprising that navigating all the ins, outs and intricacies of returns, whether they involve "above-the-line" or "below the line" deductions, can be, well, taxing. Use this quiz to test your knowledge:



1) Which of the following statements about IRA contributions made by participants in employer-sponsored retirement plans is true?

a) Contributions are always deductible.
b) Contributions are deductible only if your AGI is below an annual threshold.
c) Contributions are deductible only if you are retired.
d) Contributions are never deductible.
2) The maximum deduction for tuition and fees paid to a college is:

a) $1,000.
b) $2,000.
c) $3,000.
d) $4,000.
3) If you are self-employed, your premiums for health insurance:

a) Are deductible in full.
b) Are deductible only up to 50% of the cost.
c) Are deductible only up to 80% of the cost.
d) Are never deductible.
4) Deductions for cash gifts to charity:

a) Can be claimed above-the-line.
b) Can be claimed only if your AGI falls below a specified level.
c) Must be made by check or credit card.
d) Must be substantiated by written statements.
5) A gift of appreciated property to charity is:

a) Completely deductible.
b) Fully deductible up to 30% of your AGI.
c) Fully deductible up to 50% of your AGI.
d) Never deductible.
6) Beginning in 2013, you’ll be able to deduct unreimbursed medical expenses only to the extent that they exceed (WHAT PERCENTAGE) of your AGI.

a) 5%
b) 7.5
c) 10%
d) 12.5%
7) Mortgage interest paid on a loan to build a new home:

a) Is always deductible.
b) Is deductible on the first $100,000 of debt.
c) Is deductible on the first $1 million of debt.
d) Is never deductible.
ANSWERS
1 b
2d
3 a
4 d
5 c
6 c
7 c
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