Lesson 7: Taxes
Check Your Understanding
1. In a progressive tax system, a higher tax bracket rate applies to:
All of your income
Only income within that bracket
Last year's income
Both income and investments
2. A tax credit of $500 means:
Your income is reduced by $500
Your tax bill is reduced by $500 directly
You get a $500 refund automatically
You owe $500 more
3. The "effective tax rate" is:
Your highest bracket rate
Total taxes paid ÷ gross income
The standard deduction rate
FICA tax rate only
4. Contributing to a traditional 401(k) reduces your:
FICA taxes
Taxable income for the current year
Tax refund amount
Social Security benefits