One of the Tax Advantages of Being Self-Employed (Rather Than

question 163

Multiple Choice

One of the tax advantages of being self-employed (rather than being an employee) is:

• A)The self-employment tax is lower than the Social Security tax.
• B)The cutback adjustment does not apply.
• C)The actual cost method for deducting the business use of an automobile can be selected.
• D)Job-related expenses are deductions for AGI.
• E)A deduction for an office in the home is available.

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Definitions:

Variable Costs

Costs that vary directly with the level of production or sales volume.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Net Income

The total earnings of a company after subtracting all expenses, taxes, and costs.

Variable Costs

Variable costs are expenses that change in proportion to the activity or production level of a business.