Question

Which of the following types of income may be taxed at rates lower than the tax rate schedule would dictate? 1) Capital gains 2) Qualified dividends 3) Tax-exempt interest 4) All of the above

Answer 1

Capital gains, qualified dividends, and tax-exempt interest all may be taxed at rates lower than the typical tax schedule, making 'All of the above' the correct answer.

Step-by-step explanation:

The types of income that may be taxed at rates lower than the tax rate schedule would dictate are 1) Capital gains, 2) Qualified dividends, and 3) Tax-exempt interest. So the correct answer would be 4) All of the above.

Capital gains are profits from the sale of property or investments and can be taxed at lower rates to encourage investment and economic growth. Qualified dividends, which are paid out from the earnings of corporations, are often taxed at a lower rate similar to capital gains. Tax-exempt interest, such as that from certain municipal bonds, is not subject to federal income tax and sometimes also state and local taxes, depending on where the investor resides.

Learn more about Taxation Rates