Exam CIFC Topic 1 Question 99 Discussion

Actual exam question for IFSE Institute's CIFC exam
Question #: 99
Topic #: 1

Wilma has always used the services of a tax preparation firm to file her taxes but is skeptical that she has really benefitted. This year she plans to file her own taxes for the first time.
What would be useful for her to know?

A. Wilma's marginal tax rate may be lowered when tax deductions are applied to her total income. B. Wilma's top marginal tax rate will be applied to every taxable dollar when her tax return is filed. C. Wilma's tax deductions permit her to reduce her tax payable dollar-for-dollar. D. Wilma's non-refundable tax credits may only reduce her taxable income dollar-for-dollar.

Suggested Answer: A Vote an answer

Explanation
Tax deductions are amounts that reduce your total income before calculating your tax payable. They lower your marginal tax rate, which is the tax rate that applies to your last dollar of income. For example, if Wilma's total income is $50,000 and she claims $5,000 in tax deductions, her taxable income will be $45,000 and her marginal tax rate will be lower than if she had no deductions. Therefore, A is the correct answer.
References: All deductions, credits, and expenses - Personal income tax - Canada.ca

by Ben at Jan 27, 2025, 08:47 AM

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