April is Financial Literacy Month, and income tax returns were due last week, so I've put together a short 10-question quiz on local, state and federal tax facts.
See how many you can correctly guess. Answers and explanations are at the end of this column.
1: A married couple with two dependent children has $100,000 in adjusted gross income and a top federal income tax rate of 25 percent. What percent of their income would they actually owe in federal income tax, assuming they claim the standard deduction?
A) 25 percent
B) 15 percent
C) 11 percent
2: A person whose top federal income tax rate is 15 percent would be taxed at that rate on any interest earned on their non-retirement savings. At what rate would they be taxed on qualified dividend payments from any stock they might own.
B) 15 percent
C) 35 percent
3: The federal government offers a tax credit for each dependent child under age 17. Above certain income limits, such as $110,000 for a married couple, the credit is reduced. What is the maximum tax credit for each qualifying child?
4: South Carolina offered 41 different income tax credits for individuals in 2011. How many of those tax credits were claimed that year by fewer than 10 taxpayers?
A) None of them
B) Between 5 and 10
C) Nearly half of them
5: How much taxable income does it take to fall into South Carolina's top income tax bracket?
6: A person living in a $200,000 home that they own, in Charleston, would have received a property 2013 tax bill for $977. How much would the tax bill be if that same home were a rental property or a business?
A) The same amount, $977
B) About 50% more, $1,466
C) Roughly triple, $2,835
7: South Carolina homeowners who pay more than 5 percent of their income to insure their residence are eligible for an annual state tax credit. How much is the maximum "excess insurance premium tax credit" worth?
8: Qualifying home buyers who obtain a "mortgage credit certificate" in South Carolina before purchasing their home can get a federal tax credit worth 30 percent of their mortgage interest payments, up to a dollar limit, every year they own that home. What is the maximum annual tax credit?
9: By what percentage have Social Security retirement checks been increased since the end of 2008, to account for inflation?
A) 5 percent or less
B) between 5 and 10 percent
c) 10 percent or more
10: Social Security is funded through a payroll tax. Employees and employers each pay 6.2 percent tax on wages up to a certain amount. Above what amount are wages not subject to the tax in 2014?
A) There is no limit
C) $1 million
Thanks for playing. Here are the answers:
1: C) 11 percent. The couple's $100,000 income is reduced to $72,200 by the standard deduction and exemptions, portions are taxed at 10 percent and 15 percent, then the tax bill is reduced by $2,000 for the child tax credit.
2: A) Zero. Unlike interest earned on savings, qualified dividends within the 10 percent and 15 percent tax brackets are tax-free. For those in the 25 percent and 35 percent brackets, the tax rate is 15 percent.
3: B) $1,000.
4: C) Nearly half of them - 19 out of 41 tax credit were claimed by fewer than 10 people.
5: C) $14,251
6: C) $2,835. Properties that aren't owner-occupied are taxed on a higher portion of their value, and are not exempt from school district operating tax.
7: B) $1,250.
8: B) $2,000
9: C) 10 percent or more. Social Security checks have increased by more than 13 percent since the end of 2008.
10: B) $117,000
Reach David Slade at 937-5552