61% of Americans Flunk Basic Tax Literacy Quiz

Most Americans would flunk a basic tax literacy quiz.

In fact, about 61% of those surveyed by TaxFoundation.org did not known or were unsure of even the most basic tax concepts with regards to income taxes.

Key Points About This Article 

• About 61% of those surveyed by TaxFoundation.org did not know or were unsure of even the most basic tax concepts with regard to income taxes.
• About two-thirds of those surveyed had no idea how tax brackets work. About 48% understood that tax refunds were nothing to celebrate.
• If you’re unsure how taxes work with the federal tax code, it’s important to check with your accountant or financial advisor.
• Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. If you’ve saved and built a substantial nest egg for you and your family; get started by clicking here. (Sponsor)

For example, about two-thirds of those surveyed had no idea how tax brackets work. About 48% understood that tax refunds were nothing to celebrate.

About 64% were unsure of which was better: a $1,000 tax credit or a $1,000 tax deduction. For those unsure, with a tax credit of $1,000, a $3,000 tax bill would be cut to $2,000. With a $1,000 deduction, if you’re in the 12% tax bracket, it would reduce your taxable income by $1,000, which would save you maybe $120 on that tax bill.

If you’re unsure how taxes work with the federal tax code, it’s important to check with your accountant or financial advisor. The more you know about how taxes impact your daily life and financial decision-making, the better off you are.

Americans Aren’t Happy with the Current Tax Code

“Across the political spectrum, the results showed a general dissatisfaction with the current tax code. About two-thirds of respondents indicated the tax code is unfair and about the same share say it is overly complex, while 86 percent believe the tax code needs reform,” says TaxFoundation.org.

The survey also found that a significant portion of the U.S. population aren’t just unhappy with the current tax code, they just don’t understand it.

But that could change with further education and a simpler tax code.

At the moment, the current US tax code is more than 6,000 pages long. Worse, according to Intuit.com, “Every tax season, families look for ways to maximize their deductions and credits. Today, critical family benefits like the Earned Income Tax Credit (EITC) and the Child Tax Credit exist, but understanding eligibility and the filing process can be too difficult to navigate without help. In fact, the IRS reports that 1 in 5 qualifying filers fail to claim their EITC tax credit.”

Can You Answer These Tax Questions? 

When it comes to tax literacy, can you answer some of the top questions, including:

• Question 1: If your income places you in the 22% tax bracket, how much of your income would be taxed at a rate of 22%?
• Question 2: What tax rate applies to the top U.S. federal income tax bracket?
• Question 3: Which is more valuable: a $1,000 income tax deduction, or a $1,000 income tax credit? Or are they the same?
• Question 4: How much do you think the top 1% of taxpayers by income account for in terms of share of total federal income taxes paid?
• Question 5: Are big tax refunds a good or bad thing?

Here are a few more.

• How much is the standard deduction for a single filer in 2024? Or married?
• How many tax brackets are there for filers for 2024 taxes?
• What’s the highest tax bracket for 2024 filings?
• Should I itemize or take standard deductions?
• Can I get a tax deduction for charitable contributions?
• Which of the following is the biggest? Federal, state, Medicare, or Social Security?
• For 2024, what is the maximum penalty for failing to take the full required minimum distribution (RMD) from your tax-deferred retirement accounts?

Those are just a few of the top questions many Americans are unaware of.

And while most of you probably know the answers to those questions, a large part of the U.S. doesn’t know and may not have any interest in knowing.

But again, if you’re unsure how taxes work with the federal tax code, it’s important to check with your accountant or financial advisor. The more you know about how taxes impact your daily life and financial decision-making, the better off you are.

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