Section 2: Income, Wages, and Taxes

1: What is the difference between gross income and net income?

Gross income includes all earnings, while net income is after tax deductions and other expenses

Gross income is after tax deductions, while net income includes all earnings

Gross income is the same as net income

Gross income and net income are terms used interchangeably

2: What is the definition of “earned income”?

Money earned from investments

Money earned from a job or business

Money received as gifts

All of the above

3: What is a “tax”?

A government fee collected from individuals and businesses

A loan from the government

A payment made to charity

A reward for filing tax returns

4: What is a “tax deduction”?

Money paid to the government for public services

An amount subtracted from your taxable income

A penalty for not paying taxes on time

A tax paid by businesses only

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

Money subtracted from your taxable income

Money added to your taxable income

An amount subtracted directly from the tax you owe

A refund for not paying taxes

6: Which type of income is usually subject to taxation?

Gifts from family members

Scholarships for education

Inheritances

Earnings from a part-time job

7: Which of the following might qualify for a tax exemption?

Interest earned from a savings account

Earnings from a full-time job

Social security benefits

Rental income from a property

8: What is the purpose of a tax exemption?

To lower your taxable income

To increase the amount of tax you owe

To allow certain income to be received tax-free

To provide a tax refund

9: How does a tax credit differ from a tax deduction?

A tax credit reduces your taxable income, while a tax deduction reduces the tax you owe

A tax credit is only applicable to business income, while a tax deduction is for personal income

A tax credit and a tax deduction are the same thing

A tax credit increases your taxable income, while a tax deduction reduces the tax you owe

10: What is the “gross pay”?

Salary after tax deductions

Net income after expenses

Total earnings before any deductions

Money received from tax credits