H & R Block Income Tax Final Exam (Latest 2024/ 2025 Update) Questions and Verified Answers| 100% Correct| Grade A

H & R Block Income Tax Final Exam (Latest
2024/ 2025 Update) Questions and Verified
Answers| 100% Correct| Grade A
Q: Nash was reimbursed in 2022 by his insurance company for a medical expense that he had
previously deducted on his 2021 Schedule A (Form 1040), Itemized Deductions. What is the tax
treatment of the recovered medical expense, if any?
Answer:
The recovery is includable in income in the year received up to the amount by which the
deduction or credit claimed reduced taxes in the prior year.
Q: Paloma purchased a home with her husband, Neville, in January of 2021 for $700,000. In
June of 2021, Paloma and Neville separated. On December 31, 2022, they were still legally
married but did not live together all year. They do not live in a community property state. Neville
refused to file a joint return with Paloma. Paloma filed her return using the married filing
separately filing status. Paloma is living in the home and has continued to make the mortgage
payments using funds from her own account. Paloma will be itemizing her deductions. On what
portion of the acquisition debt will interest be deductible on Paloma’s tax return for 2022?
Answer:
$375,000
Q: If a taxpayer has to repay an amount they reported as income in an earlier year (because at
the time, they thought they had an unrestricted right to it), they may be able to claim a deduction
or a credit under the “claim of right” rules.Choose the response that correctly completes the next
sentence describing a taxpayer’s eligibility for a deduction or credit under these rules. The
taxpayer:
Answer:
ay be able to claim the deduction or credit if the amount they repaid is more than $3,000.

Q: Joshua purchased a qualified plug-in electric motor vehicle on June 2, 2022. He qualifies for
the Qualified Plug-in Electric Drive Motor Vehicle Credit. Joshua may qualify for a credit of
what amount?
Answer:
The credit ranges from $2,500 to $7,500, depending on battery capacity and other factors.
Q: To claim the Clean Vehicle Credit, the qualifying electric vehicle must have been assembled
in North America after which date?
Answer:
To claim the Clean Vehicle Credit, the qualifying electric vehicle must have been assembled in
North America after which date?
Q: The Premium Tax Credit is a credit that helps pay the cost of health care coverage through
the Health Insurance Marketplace. All the following are true, EXCEPT:
Answer:
The tax household includes the taxpayer, spouse, and anyone who is claimed as a dependent on
the tax return.
Q: Jamal purchased his home in 2019. In 2022, he installed energy efficient windows that meet
the Energy Star most efficient certification requirements for a total cost of $1,600. He also
installed exterior doors that meet the Energy Star requirements for a total cost of $2,100. His tax
liability is $3,900. Jamal had a Residential Energy Property Credit in a previous year in the
amount of $300. What is the amount of his Energy Efficient Home Improvement Credit?
Answer:
$200

Q: Taxpayers who acquire qualifying commercial vehicles, weighing under 14,000 pounds,
after December 31, 2022, through December 31, 2032 may qualify for the Credit for Qualified
Commercial Clean Vehicles on the 2023 tax return. What is the maximum credit per vehicle?
Answer:
$7,500
Q: Devan and Amber adopted a child with special needs in a domestic adoption. They had
$5,500 in qualified adoption expenses in 2022, and the adoption was finalized on December 18,

Their modified adjusted gross income is $210,000. Assuming all requirements are met,
what is the maximum adoption credit they can claim in 2022?
Answer:
$14,890
Q: Stanley holds foreign investments in foreign stocks and bonds. The issuing foreign country
withheld taxes on his investment income. To avoid double taxation on the income earned from
these investments, Stanley may be eligible to claim which credit?
Answer:
Foreign Tax Credit.
Q: On July 15, 2008, Michael and his wife Julie purchased a new home. They received the
First-time Homebuyer Credit in the amount of $7,000. What tax form is used to repay their tax
credit?
Answer:
Form 5405.
Q: Marcel attends graduate school. For 2022, he received a Form 1098-T, Tuition Statement,
showing tuition paid of $14,300. What is the maximum amount of the lifetime learning credit he
can claim for 2022?
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Duke and his wife were legally divorced in 2021. After the divorce, Duke retained physical custody of their son. Duke received the following amounts from his ex-wife, on behalf of their son or as ordered by the court through a divorce decree:

Court-ordered child support of $2,000 per month.
Court-ordered alimony of $1,000 per month.

How much of this income should be reported on Duke’s federal return?

a) $0
b) $12,000
c) $24,000
d) $36,000
a) $0

Which of the following individuals is an eligible educator and may deduct up to $300 of qualified educator expenses? (None of them received any reimbursements.)

a) Mr. Francis is a teacher’s aide at the local high school. He taught part-time. He worked 600 hours during the year and spent $400 on teaching supplies used in his classroom.
b) Mr. Chang is a fourth-grade teacher. He taught full-time in a classroom and worked more than 900 hours during the school year. He spent $750 on teaching supplies used in his classroom.
c) Mrs. Sullivan is a professor at the local community college. She taught full-time during the entire school year. She spent $500 on teaching supplies used in her classroom.
d) Ms. Rowling homeschools her three children. She spent $950 on books, computer software, and classroom supplies.
b) Mr. Chang is a fourth-grade teacher. He taught full-time in a classroom and worked more than 900 hours during the school year. He spent $750 on teaching supplies used in his classroom.

Which of the following is an example of taxable alimony?

a) A cash or check payment made under a decree of divorce or separation. The marriage settlement agreement was signed before December 31, 2018.
b) Child support payments.
c) A property transfer made within one year of a divorce.
d) Voluntary payments made outside of an agreement or a court decree of divorce or separation.
a) A cash or check payment made under a decree of divorce or separation. The marriage settlement agreement was signed before December 31, 2018.

Karen and Pete are married and will file a joint return. They brought all their tax documents to Jamal to prepare their return. The three documents are a Form W-2 for Karen ($55,300), a Form W-2 for Pete ($22,400), and unemployment compensation for Pete of $5,200. What will be their total income reported on their 2022 Form 1040, line 9?

a) $27,600
b) $55,300
c) $77,700
d) $82,900
d) $82,900

Brian and Joy are divorced. Their divorce settlement agreement signed on June 1, 2017, states Brian must pay Joy $1,000 per month for child support and $1,000 per month for alimony.

Joy’s child support payments are:

a) Considered alimony.
b) Fully taxable.
c) Nontaxable.
d) Partially taxable.
c) Nontaxable.

Devan and Amber adopted a child with special needs in a domestic adoption. They had $5,500 in qualified adoption expenses in 2022, and the adoption was finalized on December 18, 2022. Their modified adjusted gross income is $210,000. Assuming all requirements are met, what is the maximum adoption credit they can claim in 2022?

a) $5,500
b) $14,300
c) $14,890
d) $20,390
c) $14,890

If a taxpayer files their return claiming an education credit for the full amount of a student’s qualified education expenses and later receives a refund from the institution, what advice will you give to the taxpayer?

a) All credits will be reduced in future years.
b) Any future education credits will be disallowed.
c) There is no tax consequence.
d) They will have to recapture (pay back) some of the credit claimed.
d) They will have to recapture (pay back) some of the credit claimed.

Taxpayers who acquire qualifying commercial vehicles, weighing under 14,000 pounds, after December 31, 2022, through December 31, 2032 may qualify for the Credit for Qualified Commercial Clean Vehicles on the 2023 tax return. What is the maximum credit per vehicle?

a) $3,750
b) $4,000
c) $5,000
d) $7,500
d) $7,500

Ellen and her husband were legally divorced in 2017. After divorce, Ellen retained physical custody of their children. Ellen received the following amounts from her ex-husband, on behalf of the children or as ordered by the court through a divorce decree:

Court-ordered child support of $1,000 per month.
Court-ordered alimony of $500 per month.

How much of this income should be reported on HELLEN federal return?

a) $0
b) $6,000
c) $12,000
d) $18,000
b) $6,000

Monica cashed in a CD (certificate of deposit) early because she needed money quickly to pay credit card bills. The bank charged her an early withdrawal penalty of 3#, which amounted to $90. Can Monica deduct the penalty on her tax return? If so, where on the return is it reported?

a) No; Monica will not be allowed to deduct the early withdrawal penalty.
b) Yes; Monica can deduct the early withdrawal penalty but only if she uses Schedule A (Form 1040) and itemizes.
c) Yes; Monica can deduct $90 on Part II, line 18 of Schedule 1 (Form 1040) as an adjustment to income.
d) Yes; Monica can deduct $90 on Part II, line 8 of Schedule 2 (Form 1040) as an adjustment to income.
c) Yes; Monica can deduct $90 on Part II, line 18 of Schedule 1 (Form 1040) as an adjustment to income.

In 2022, Gabby incurred $2,500 in unreimbursed employee business expenses (none of the expenses are impairment-related). Her adjusted gross income was 50,000, and she had no other miscellaneous deductions. What amount is she able to deduct on her 2022 Schedule A (Form 1040), Itemized Deductions?

a) $0
b) $1,000
c) $1,500
d) $2,500
a) $0

Robert is single. He purchased a new main home in March of 2017 for $900,000. Robert will be itemizing his deductions. On what portion of the acquisition debt will interest be deductible on Robert’s tax return for 2022?

a) $375,000
b) $500,000
c) $750,000
d) $900,000
d) $900,000

On what forms are noncash contributions totaling more than $500 reported?

a) Form 8283, Noncash Charitable Contributions, and Schedule A (Form 1040), Itemized Deductions.
b) Form 8283, Noncash Charitable Contributions, and Schedule 1 (Form 1040), Additional Income and Adjustments to Income.
c) Schedule A (Form 1040), Itemized Deductions, and Schedule 1 (Form 1040), Additional Income and Adjustments to Income.
d) Schedule A (Form 1040), Itemized Deductions, and Form 1040, U.S. Individual Income Tax Return.
a) Form 8283, Noncash Charitable Contributions, and Schedule A (Form 1040), Itemized Deductions.

Zoya has a first mortgage and a smaller home equity loan. Zoya took out the home equity loan on January 3, 2021. It was not used to build, buy, or improve her home. The equity loan proceeds were used to purchase a new car and pay off credit cards. During the year, she paid $6,350 in interest on her first mortgage and $1,490 in interest on the home equity loan. What amount of mortgage interest can Zoya deduct on her Schedule A (Form 1040), Itemized Deductions?

a) $1,490
b) $4,860
c) $6,350
d) $7,840
c) $6,350

Mark paid $255 for the annual registration on his truck. The fee includes:

$50 registration fee.
$5 plate fee.
$200 1% of the assessed value of the vehicle.

What amount may be deductible on Mark’s Schedule A (Form 1040), Itemized Deductions, as a personal property tax?

a) $5
b) $50
c) $200
d) $250
c) $200

Which of these would be fully deductible in 2021 on Schedule A (Form 1040), Itemized Deductions?

a) Investment interest expense of $800 with investment income of $900.
b) Investment interest expense of $1,200 with investment income of $1,100.
c) Investment interest expense of $1,900 with $1,350 in investment income.
d) Investment interest expense of $1,400 with investment income of $1,500 ($300 of which was from municipal bond interest).
a) Investment interest expense of $800 with investment income of $900.

In 2019, Zoya purchased her principal residence for $400,000. On January 15, 2022, when she owed $360,000 on the original mortgage, she took out a home equity loan. In January 2022, the fair market value of the home was $490,000. The home equity loan proceeds were used to purchase a new car and pay off credit cards. It was not used to build, buy, or improve her home. During the year, she paid $6,350 in interest on her first mortgage and $1,490 in interest on the home equity loan. What amount of mortgage interest can Zoya deduct on her Schedule A (Form 1040), Itemized Deductions?

a) $1,490
b) $4,860
c) $6,350
d) $7,840
c) $6,350

Choose the response that correctly completes the next sentence describing a taxpayer’s eligibility for a deduction or credit under these rules. The taxpayer:

a) May only deduct the repayment as an “other” itemized deduction on Schedule A (Form 1040), line 16, if the amount they previously included in income is less than $3,000.
b) May be able to claim either the deduction or the credit if the amount they repaid is less than $3,000.
c) Maybe be able to claim the deduction or credit if the amount they repaid is more than $3,000.
d) Must always include the amount they repaid in their income in the year in which they repaid it.
c) Maybe be able to claim the deduction or credit if the amount they repaid is more than $3,000.

Manuel drove his car 400 miles in 2022 to perform volunteer work. He did not keep records of the actual cost for gas or oil. How much can he deduct as a charitable contribution on his Schedule A (Form 1040), Itemized Deductions?

a) $0
b) $56
c) $72
d) $234
b) $56

What is the amount of allowable medical and dental expenses Megan can report on Schedule A (Form 1040), line 4?

a) $1,780
b) $5,250
c) $7,030
d) $8,280
a) $1,780

Jamal purchased his home in 2019. In 2022, he installed energy efficient windows that meet the Energy Star most efficient certification requirements for a total cost of $1,600. He also installed exterior doors that meet the Energy Star requirements for a total cost of $2,100. His tax liability is $3,900. Jamal had a Residential Energy Property Credit in a previous year in the amount of $300. What is the amount of his Energy Efficient Home Improvement Credit?

a) $200
b) $370
c) $500
d) $3,700
a) $200

Josef has two daughters, Paige, age 4, and Natalie, age 10. Josef paid a local day care provider $6,000 for Paige from January through December and $4,000 for Natalie from January through June. Josef’s earned income is $70,000. Assuming all other requirements are met, how much expense can be used to calculate Josef’s 2022 Child and Dependent Care Credit?

a) $3,000
b) $6,000
c) $8,000
d) $10,000
b) $6,000

Paloma purchased a home with her husband, Neville, in January of 2021 for $700,000. In June of 2021, Paloma and Neville separated. On December 31, 2022, they were still legally married but did not live together all year. They do not live in a community property state. Neville refused to file a joint return with Paloma. Paloma filed her return using the married filing separately filing status. Paloma is living in the home and has continued to make the mortgage payments using funds from her own account. Paloma will be itemizing her deductions. On what portion of the acquisition debt will interest be deductible on Paloma’s tax return for 2022?

a) $0
b) $350,000
c) $375,000
d) $700,000
c) $375,000

Choose the response that accurately completes the following sentence. Written acknowledgment from the donee for contributions to qualified charitable organizations is required when a taxpayer makes a single donation of:

a) $50 or more.
b) $100 or more.
c) $250 or more.
d) $500 or more.
c) $250 or more.

Viola (45) is single. Her 2021 federal itemized deductions totaled $15,400, of which she claimed $1,000 of state income taxes paid in 2021. She filed her tax return on April 14, 2022, and on May 1, 2022, she received a $1,000 state income tax refund.
How much of her 2021 state income tax refund is taxable on her 2022 federal return?

a) $0
b) $500
c) $1,000
d) $2,000
c) $1,000

Ivan and Josefina paid $5,000 of qualified adoption expenses in 2022. They received $2,000 of adoption assistance benefits from Josefina’s employer in 2022. Their daughter’s adoption became final on July 1, 2022. Their modified adjusted gross income is $100,500. Assuming all requirements are met, what is the amount they can claim for the Adoption Credit on Form 8839, line 16?

a) $0
b) $2,000
c) $3,000
d) $5,000
c) $3,000

Stanley holds foreign investments in foreign stocks and bonds. The issuing foreign country withheld taxes on his investment income. To avoid double taxation on the income earned from these investments, Stanley may be eligible to claim which credit?

a) Alternative Minimum Tax Credit
b) Foreign Tax Credit
c) Foreign Earned Income Exclusion.
d) Saver’s Credit
b) Foreign Tax Credit

Mr. and Mrs. Novak are both under age 65. Mr. Novak is retired on permanent and total disability. Regarding the credit for the elderly or the disabled, what is the adjusted gross income limit for a married filing jointly couple (both under age 65) with one qualifying spouse who passes the age or disability test?

a) $12,500 or more.
b) $17,500 or more.
c) $20,000 or more.
d) $25,000 or more.
c) $20,000 or more.

The Premium Tax Credit is a credit that helps pay the cost of health care coverage through the Health Insurance Marketplace. All the following are true, EXCEPT:

a) Form 8962, Premium Tax Credit, calculates the taxpayer’s Premium Tax Credit and reconciles it with any Advance Premium Tax Credit (APTC) received.
b) Taxpayers are not required to reconcile the Premium Tax Credit.
c) The Premium Tax Credit is either advanced to the taxpayer or refunded through their income tax return as a refundable credit.
d) The tax household includes the taxpayer, spouse, and anyone who is claimed as a dependent on the tax return.
b) Taxpayers are not required to reconcile the Premium Tax Credit.

Desiree is single. Her modified adjusted gross income is $70,000. She purchased a previously-owned electric vehicle on January 15, 2023 for $20,000 from a dealer. The vehicle meets all the requirements for the Previously-Owned Clean Vehicle Credit. What is the maximum credit amount Desiree may qualify for on her 2023 tax return?

a) $1,000
b) $4,000
c) $6,000
d) $7,500
b) $4,000

On July 1, 2008, Michael and his wife Julia purchased a new home. They received the First-time Homebuyer Credit in the amount of $7,000. What tax form is used to repay their tax credit?

a) Form 1116
b) Form 3800
c) Form 5405
d) Form 8936
c) Form 5405

What is the maximum amount of tax years a student may claim the lifetime learning credit?

a) Two years.
b) Four years.
c) Five years.
d) An unlimited number of tax years.
d) An unlimited number of tax years.

Which of the following statements is TRUE regarding nontaxable employer-provided tuition reimbursements?

Nontaxable employer-provided tuition reimbursements:

a) Are tax-free and cannot be used to claim any education credit.
b) May be used to claim the American Opportunity Tax Credit and the lifetime learning credit.
c) May be used to claim the American Opportunity Tax Credit, but not the lifetime learning credit.
d) May be used to claim the lifetime learning credit, but not the American Opportunity Tax Credit.
a) Are tax-free and cannot be used to claim any education credit.

Christine wants to sell some property but needs to determine the basis first. Which of the following items increase her original basis?

a) Discounts, rebates, or reimbursements of the purchase price.
b) Insurance reimbursements for property damage.
c) Tax credits received through ownership of the asset.
d) The cost of capital improvements.
d) The cost of capital improvements.

If a taxpayer claiming the American Opportunity Tax Credit has their tax liability reduced to zero, what is the maximum amount they may receive as a refundable credit:

a) 25% of the credit, up to $2,000.
b) 40% of the credit, up to $1,000.
c) 100% of the first $2,000 of qualitied education expenses.
d) 100% of the first $4,000 of qualified education expenses.
b) 40% of the credit, up to $1,000.

Which of the following expenses is allowed for the American Opportunity Tax Credit?

a) Noncredit courses.
b) Room and board.
c) Student health fees.
d) Tuition payments
d) Tuition payments

Audrey is a degree candidate at her local state college. She received a scholarship for $5,000. She applied the amount to her tuition, which totaled $10,000. How much, if any, of the scholarship is taxable income?

a) $0
b) $2,000
c) $2,500
d) $5,000
a) $0

Barry is a junior at the University of Phoenix. For 2022, he received a Form 1098-T, Tuition Statement, showing his tuition and scholarship amounts. Assuming all requirements are met, what is the maximum amount Barry could claim for the American Opportunity Tax Credit?

a) $1,500
b) $2,000
c) $2,500
d) $4,000
c) $2,500

Ariel’s grandmother, Mariam, gave her a diamond ring as a gift, which Mariam’s husband had given her at the birth of their first child. The original cost of the ring was $3,000. At the time Ariel received the ring, the fair market value was $4,000. What is Ariel’s basis for the ring?

a) $0
b) $1,000
c) $3,000
d) $4,000
c) $3,000

Kamani received Form 1099-DIV, Dividends and Distributions, shown below. Where on Kamani’s Form 1040 should this income be reported? (All of Kamani’s other income was from wages.)

a) $196 on line 2a, $381 on line 2b, and $450 on line 7.
b) $196 on line 3a, $381 on line 3b, and $450 on line 7.
c) $196 on line 3a, $185 on line 3b, and $450 on line 8.
d) $381 on line 3a, $196 on line 3b, and $450 on line 8.
b) $196 on line 3a, $381 on line 3b, and $450 on line 7.

In 2022, using a cryptocurrency platform, Sam sold bitcoin that he held as a capital asset, as an individual. How will this sale be reported on Sam’s tax return?

Same will check the “Yes” box next to the question on virtual currency on page 1 of Form 1040 and:

a) He will use Form 8949 to figure his capital gain or loss and report it on Schedule D (Form 1040).
b) He will use Schedule C (Form 1040) to report the sale.
c) He will use Schedule E (Form 1040) to report the sale.
d) The gain or loss from the sale of virtual currency is not taxable and does not need to be reported anywhere else on his return.
a) He will use Form 8949 to figure his capital gain or loss and report it on Schedule D (Form 1040).

What is the federal tax treatment of capital gain distributions reported on Form 1099-DIV, Dividends and Distributions?

Capital gain distributions are:

a) Always tax-exempt.
b) Taxed as ordinary income.
c) Treated as long-term capital gains.
d) Treated as short-term capital gains.
c) Treated as long-term capital gains.

Stevie received significant dividend income during the tax year. How should she report the dividend income if she has ordinary dividend income in excess of $1,500?

a) On Form 1040, line 3a.
b) On Form 1040, lines 3a and 3b.
c) On Schedule B and Form 1040, line 3a.
d) On Schedule B and Form 1040, line 3b.
c) On Schedule B and Form 1040, line 3a.

Owen received the following form 1099-B reporting the sale of 100 shares of stock. How should the sale of this property be reported on his tax return?

a) Short-term capital loss of $1,660.
b) Long-term capital loss of $1,660.
c) Short-term capital gain of $1,660.
d) Long-term capital gain of $6,640.
b) Long-term capital loss of $1,660.

Lindsey inherited a gold necklace from her grandfather. The original cost of the necklace was $3,000 and the fair market value when her grandfather died was $4,000. What is Lindsey’s basis for the necklace?

a) $0
b) $1,000
c) $3,000
d) $4,000
d) $4,000

Sales and exchanges of personal-use and investment-use property are generally reported first on Form 8949, Sales and Other Dispositions of Capital Assets. The totals reported on Form 8949 are then carried to which form or schedule?

a) Form 1099-B
b) Schedule B (Form 1040)
c) Schedule D (Form 1040)
d) Schedule 1 (Form 1040).
c) Schedule D (Form 1040)

George graduated from college last year and started repaying his student loans. He received Form 1098-E, Student Loan Interest Statement, showing he paid $3,000 in interest on his student loans for the year. His total income before adjustments is $68,500, and he meets all requirements to be able to deduct the interest. How much, if any, will George be allowed to deduct as an adjustment to his income?

a) $0
b) $600
c) $2,500
d) $3,000
c) $2,500

a) The amount recovered is not taxable and should not be included on the 2022 return.
b) The amount recovered should be deducted on Schedule A (Form 1040), Itemized Deductions, as a medical expense again in 2022.
c) The recovery is includable in income in the year received up to the amount by which the deduction or credit claimed reduced taxes in the prior year.
d) The 2021 return must be amended to remove the medical expense that was recovered.
c) The recovery is includable in income in the year received up to the amount by which the deduction or credit claimed reduced taxes in the prior year.

Soledad is single. He borrowed $900,000 and purchased a new main home in March of 2020. Soledad will be itemizing his deductions. On what portion of the acquisition debt will interest be deductible on Soledad’s tax return for 2022?

a) $375,000
b) $500,000
c) $750,000
d) $900,000
c) $750,000

Megan is single, 45 years old, and has an adjusted gross income of $70,000 for the tax year. She had the following medical expenses:

Prescriptions: $1,480
Doctor copays: $950
Dental bills: $2,800
Elective tummy tuck surgery: $6,500
Health insurance premiums (after tax): $1,800

What is the amount of allowable medical and dental expenses Megan can report on Schedule A (Form 1040), line 4?

a. $7030
b. $1780
c. $5250
d. $8280
b. $1780

On the schedule A (Form 1040), Itemized Deductions, the deduction for state and local income taxes is limited to what amount?

a) $10,000 ($5,000 if MFS).
b) $50,000 ($25,000 if MFS).
c) $100,000 ($50,000 if MFS).
d) There is no limit on the deduction of state and local income taxes.
a) $10,000 ($5,000 if MFS).

Adela brings in receipts and verifications for the following charitable contributions she made in 2022:

Local church, $2,000 by check.
American Red Cross, $500 through payroll deductions.
Campaign fund of a City Council candidate, $300 cash.
Habitat for Humanity, work valued at $250.
Girl Scouts, drove 200 miles in her car for volunteer work.

How much will she be able to deduct for charitable contributions on Schedule A (Form 1040), Itemized Deductions?

a) $2,500
b) $2,528
c) $2,607
d) $3,078
b) $2,528

Which of the following statements is CORRECT regarding the married filing separately standard deduction?

a) If both spouses take the standard deduction, the sum of their standard deductions is smaller than the standard deduction for married filing jointly.
b) If only one spouse itemizes, the other spouse must itemize and could have a deduction smaller than the standard deduction.
c) The standard deduction for married filing separately is different than the single filing status.
d) When a couple decides to file married filing separately, one may take the standard deduction and the other one may itemize.
b) If only one spouse itemizes, the other spouse must itemize and could have a deduction smaller than the standard deduction.

a) 10% of the purchase price of the vehicle.
b) $8,000 per qualifying vehicle.
c) The credit ranges from $2,500 to $7,500, depending on battery capacity and other factors.
d) The credit ranges from $2,500 to $7,500, depending on the purchase price of the vehicle.
c) The credit ranges from $2,500 to $7,500, depending on battery capacity and other factors.

To claim the clean vehicle credit, the qualifying electric vehicle must have been assembled in north America after which date?

a) August 16, 2022
b) January 1, 2023
c) December 31, 2023
d) January 1, 2024
a) August 16, 2022

Marcel attends graduate school. For 2022, he received a Form 1098-T, Tuition Statement, showing tuition paid of $14,300. What is the maximum amount of the lifetime learning credit he can claim for 2022?

a) $2,000
b) $2,860
c) $4,000
d) $14,300
a) $2,000

Assuming they meet all other requirements, which of these taxpayers may claim the American Opportunity Tax Credit (AOTC)?

a) Jillian is a full-time student. She completed four years of postsecondary education and is now working towards her Master of Arts degree. She would like to claim the AOTC.
b) Kent would like to claim the AOTC for his son, who is a sophomore at a state university.
c) Omar would like to claim the AOTC for his son, who is attending a private secondary school.
d) Marla is claimed by her parents but would like to claim her own education credit.
b) Kent would like to claim the AOTC for his son, who is a sophomore at a state university.

Yolanda bought a vacation home for $255,000, plus $500 in legal fees. She also paid an additional closing cost of $4500 to cover the cost of a survey, title search, and recording fees. She also gave ger realtor a gift card for $500. What is the basis of her vacation home?

a) $255,000
b) $259,500
c) $260,000
d) $260,500
c) $260,000

Jordyn is single. She purchased her first home for $180,000 in 2018. It served as her primary residence until she sold it on November 1, 2022 for $440,000. She paid a $26,400 commission as an expense of sale. During the time she owned her home, she did not use it for business or to produce rental income. What is the amount of her long-term gain that can she exclude from income on her return?

a) $233,600
b) $250,000
c) $260,000
d) $440,000
a) $233,600

Which of the following will decrease the original basis of property to determine the adjusted basis?

a) Assessments for local improvements.
b) Capital improvements.
c) Casualty loss deductions.
d) Legal fees.
c) Casualty loss deductions.

What is the federal tax treatment of exempt-interest dividends reported on Form 1099-DIV, Dividends and Distributions? Exempt-interest dividends are:

a) Not taxable at the federal level and are not reported on the federal tax return.
b) Not taxable at the federal level. However, taxpayers are still required to report the income on their tax return.
c) Taxable as long-term capital gains on the federal return.
d) Taxable as ordinary income on the federal return.
b) Not taxable at the federal level. However, taxpayers are still required to report the income on their tax return… ???

Donna owned a house for which she paid $300,000. She added a new room at a cost of $10,000. She later sold the house for $350,000 and paid a $20,000 sales commission. What is Donna’s gain or loss?

a) $20,000 gain.
b) $20,000 loss.
c) $40,000 gain.
d) $50,000 gain.
a) $20,000 gain.

Kailani has a bank account at Lending Bank. She received Form 1099-INT, Interest Income, shown below. She has no other interest or dividends report. Where should this income be reported on Kailani’s tax return? Answer choices are below the image.

a) $45 on line 2a, $640 on line 2b, of Form 1040.
b) $410 on line 2a, $230 on line 2b of Form 1040, and $45 on line 18 of Schedule 1 (Form 1040).
c) $640 on Part I of Schedule B, and $45 on line 18 of Schedule 1 (Form 1040).
d) $640 on line 2b of Form 1040, and $45 on line 18 of Schedule1 (Form 1040).
d) $640 on line 2b of Form 1040, and $45 on line 18 of Schedule1 (Form 1040).

If a taxpayer’s total deduction for all noncash contributions for the year is over $500, which form must be filed?

a) Form 2106
b) Form 4684
c) Form 8283
d) Schedule 1 (Form 1040)
c) Form 8283

Muhammad paid $485 for the annual registration on his truck. The fee includes:

$75 registration fee.
$10 plate fee.
$400, 1% of the assessed value of the vehicle.

What amount can he deduct on the Schedule A (Form 1040), Itemized Deductions, as a personal property tax?

a) $10
b) $75
c) $400
d) $485
c) $400

Justin won $1,000 at Lucky Casino and $1,350 at Riverboat Casino. His losses for the year at Lucky Casino were $2,000 and his losses at Riverboat were $800. He also spent $100 for lottery tickets without winning anything. How much can he deduct on Schedule A (Form 1040), Itemized Deductions, for gambling losses?

a) $0
b) $2,350
c) $2,800
d) $2,900
b) $2,350

Harmony donated a car to a qualified charitable organization. She purchased the car in 2013 for $28,000. The fair market value of the car when she donated it was $3,750. The charitable organization immediately sold the car for $2,000. They did not significantly use or make any improvements to it. The organization provided Harmony with a Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes. How much can she deduct as a charitable contribution on her Schedule A (Form 1040), Itemized Deductions?

a) $500
b) $2,000
c) $3,750
d) $28,000
b) $2,000

Health insurance purchased through the Marketplace would be reported to the taxpayer on which form(s)?

a) Form 1095-A.
b) Form 1095-B.
c) Form 1095-C.
d) Forms 1095-B, and Form 1095-C.
a) Form 1095-A.

Rhianna purchased a home for $650,000. She added a swimming pool at a cost of $25,000 and a patio deck for $8,000. What is Rhianna’s adjusted basis for this property?

a) $650,000
b) $658,000
c) $675,000
d) $683,000
d) $683,000

Which of the following is a capital asset?

a) Copyrights.
b) Depreciable property used in a trade or business.
c) Inventory held mainly for sale to customers in a taxpayer’s trade or business.
d) Land, purchased and held for potential increase in value.
d) Land, purchased and held for potential increase in value.

Which of the following is used to calculate the tax due when a taxpayer’s only investment income is from capital gain distributions from a mutual fund?

a) Alternative Minimum Tax Worksheet.
b) Estimated Tax Worksheet.
c) Qualified Dividends and Capital Gain Tax Worksheet.
d) Schedule D Tax Worksheet.
c) Qualified Dividends and Capital Gain Tax Worksheet.

On October 1, 2021, Sara purchased 80 shares of JEP stock for $2,000. On September 30, 2022, she sold the 80 shares for $1,500. Therefore, Suzy has:

a) A long-term gain of $500.
b) A long-term loss of $500.
c) A short-term gain of $500.
d) A short-term loss of $500.
d) A short-term loss of $500.

Mike is filing single. He purchased 100 shares of BTL stock in 2020. He sold the shares for a net gain of $2,000 in 2022. Mike’s 2022 taxable income is $53,500. His gain on the stock sale will be taxed at what rate?

a) 0%
b) 15%
c) 20%
d) 22%
b) 15%

Uri and Autry are married and will file joint return. They purchased their first home in 2016. The home served as their primary residence until June 2022, when they sold the home. They had a long-term capital gain of $600,000. Uri and Autry meet the ownership and use tests. How much of the long-term gain can they exclude from income on their return?

a) $0
b) $250,000
c) $500,000
d) $600,000
d) $600,000

What is the federal tax treatment of ordinary dividends?

Ordinary dividends are taxed:

a) As a capital gain distribution.
b) As long-term capital gains.
c) As ordinary income.
d) The same as qualified dividends.
c) As ordinary income.

On July 15, 2008, Michael and his wife Julie purchased a new home. They received the First-time Homebuyer Credit in the amount of $7,000. What tax form is used to repay their tax credit?

a) Form 1116.
b) Form 3800.
c) Form 5405.
d) Form 8936.
c) Form 5405.

Becky (30) spent $3,800 for tuition and required course fees to complete two college courses during the year. Becky cannot be claimed as a dependent on anyone else’s return, and she will use the single filing status. She is not a degree candidate, nor was she a full-time student. However, the courses she took were job-related. Her 2022 modified adjusted gross income was $85,000. Given the information provided, Becky potentially qualifies for which of the following tax benefits for education?

a) American Opportunity Tax Credit.
b) Lifetime learning credit.
c) Becky does not qualify for any tax benefit for education.
d) Tuition and fees deduction.
b) Lifetime learning credit.

Which of the following individuals is an eligible educator and may deduct up to $300 of qualified educator expenses? (None of them received any reimbursements.)
Mr. Chang is a fourth-grade teacher. He taught full-time in a classroom and worked more than 900 hours during the school year. He spent $750 on teaching supplies used in his classroom

Ellen and her husband were legally divorced in 2017. After the divorce, Ellen retained physical custody of their children. Ellen received the following amounts from her ex-husband, on behalf of the children or as ordered by the court through a divorce decree:
Court-ordered child support of $1,000 per month.
Court-ordered alimony of $500 per month.
How much of this income should be reported on Ellen’s federal return?
6,000

Brian and Joy are divorced. Their divorce settlement agreement signed on June 1, 2017, states Brian must pay Joy $1,000 per month for child support and $1,000 per month for alimony.
Joy’s child support payments are:
Nontaxable.

On the Schedule A (Form 1040), Itemized Deductions, the deduction for state and local income taxes is limited to what amoun
$10,000 ($5,000 if MFS).

Nash was reimbursed in 2022 by his insurance company for a medical expense that he had previously deducted on his 2021 Schedule A (Form 1040), Itemized Deductions. What is the tax treatment of the recovered medical expense, if any?
The recovery is includable in income in the year received up to the amount by which the deduction or credit claimed reduced taxes in the prior year.

Joshua purchased a qualified plug-in electric motor vehicle on June 2, 2022. He qualifies for the Qualified Plug-in Electric Drive Motor Vehicle Credit. Joshua may qualify for a credit of what amount?
The credit ranges from $2,500 to $7,500, depending on battery capacity and other factors.

To claim the Clean Vehicle Credit, the qualifying electric vehicle must have been assembled in North America after which date?
To claim the Clean Vehicle Credit, the qualifying electric vehicle must have been assembled in North America after which date?

The Premium Tax Credit is a credit that helps pay the cost of health care coverage through the Health Insurance Marketplace. All the following are true, EXCEPT:
The tax household includes the taxpayer, spouse, and anyone who is claimed as a dependent on the tax return.

On July 15, 2008, Michael and his wife Julie purchased a new home. They received the First-time Homebuyer Credit in the amount of $7,000. What tax form is used to repay their tax credit?
Form 5405.

Tuition payments.
Which of the following expenses is allowed for the American Opportunity Tax Credit?

What is the maximum amount of tax years a student may claim the lifetime learning credit?
Unlimited

Which of the following statements is TRUE regarding nontaxable employer-provided tuition reimbursements? Nontaxable employer-provided tuition reimbursements:
Are tax-free and cannot be used to claim any education credit.

Rhianna purchased a home for $650,000. She added a swimming pool at a cost of $25,000 and a patio deck for $8,000. What is Rhianna’s adjusted basis for this property?
$683,000

Christine wants to sell some property but needs to determine the basis first. Which of the following items increase her original basis?
The cost of capital improvements.

On October 1, 2021, Sara purchased 80 shares of JEP stock for $2,000. On September 30, 2022, she sold the 80 shares for $1,500. What is Sara’s gain or loss?
A short-term loss of $500.

Owen received the following Form 1099-B reporting the sale of 100 shares of stock. How should the sale of this property be reported on his tax return?
Long-term capital loss of $1,660.

Which of the following is used to calculate the tax due when a taxpayer’s only investment income is from capital gain distributions from a mutual fund?
Qualified Dividends and Capital Gain Tax Worksheet

Stevie received significant dividend income during the tax year. How should she report the dividend income if she has ordinary dividend income in excess of $1,500?
On Schedule B and Form 1040, line 3b.

What is the federal tax treatment of capital gain distributions reported on Form 1099-DIV, Dividends and Distributions?
Treated as long-term capital gains.

Which of the following will decrease the original basis of property to determine the adjusted basis?
Legal fees.

Malachi has a savings account at his local credit union. He earned $50 on deposits made to this account. How is this income reported on his tax return?The income will be reported as:
Regular Interest

In 2022, Rich (28) lived with his daughter, Ava (4), his brother, Joe (18), and his fiancée, Linda (30) for the entire year. Rich’s adjusted gross income is $36,555, Joe’s gross income is $4,100, Linda’s gross income is $5,900, and Ava has no income. None of the individuals in the household were disabled or students during the year. Neither Joe, nor Linda, nor Ava provided over half of their own support. Rich qualifies for and files as head of household in 2022. How many qualifying dependents can Rich claim on his return?
Rich can claim 2, not linda.

Terry and Sal divorced in 2019. During 2022, their son Nick lived with his mother, Terry, Terry’s mother (Andrea), and Terry’s best friend (Vanna) from January 1 to November 1. During that time, Nick visited Sal every other weekend for a total of 40 nights.On November 2, Nick went to live with Sal for the rest of the year. After that time, Nick visited Terry, Andrea, and Vanna every other weekend for a total of 16 nights.Terry’s adjusted gross income (AGI) was $33,100, Andrea’s AGI was $21,500, Vanna’s AGI was $32,600, and Sal’s AGI was $29,900.Who has the superior claim to Nick’s dependency?
Terry

Freida is not married. Her son, Diego, lived with her all year. To claim the filing status of head of household, Freida must:
More than Half

A taxpayer may qualify for one of several exceptions to the additional tax on early distributions. Which of these would be an exception?
An exception to the additional tax on early distributions is a 401(k) distribution made to an alternate payee under a qualified domestic relations order (QDRO).

Harry (71), a single taxpayer, began receiving a pension of $3,500 per month for life on May 1, 2009. He has after-tax contributions in the plan. His 2022 Form 1099-R is shown below. Box 2a is blank. Which of the following statements is CORRECT?Answer choices are below the image.
The taxable portion of Harry’s pension distribution is determined using the Simplified Method Worksheet, as Box 2a is blank on his Form 1099-R, implicating that the taxable amount has not been calculated and needs to be figured considering his after-tax contributions.

Jeff (55) and Tara (49) are filing jointly for 2022. Jeff earned $40,000, and Tara earned $2,500. Jeff may contribute up to $7,000 to his IRA for 2022. If Jeff contributes $5,000 to his IRA, how much can they contribute to Tara’s IRA for 2022?
2,000

Kailani has a bank account at Lending Bank. She received Form 1099-INT, Interest Income, shown below. She has no other interest or dividends to report. Where should this income be reported on Kailani’s tax return? Answer choices are below the image.
Kailani should report the interest income from her Form 1099-INT on her federal tax return, either on Schedule B or directly on Form 1040 in the ‘Interest and Ordinary Dividends’ section, depending on the total amount of her interest income.

Interest income from Form 1099-INT should be reported on Kailani’s tax return on the “Interest income” line of the Form 1040 or 1040-SR, and on Schedule B if required.

If a taxpayer has to repay an amount they reported as income in an earlier year (because at the time, they thought they had an unrestricted right to it), they may be able to claim a deduction or a credit under the “claim of right” rules. Choose the response that correctly completes the next sentence describing a taxpayer’s eligibility for a deduction or credit under these rules. The taxpayer:
more than 3,000

Adela brings in receipts and verifications for the following charitable contributions she made in 2022:
Local church, $2,000 by check.
American Red Cross, $500 through payroll deductions.
Campaign fund of a City Council candidate, $300 cash.
Habitat for Humanity, work valued at $250.
Girl Scouts drove 200 miles in her car for volunteer work.
How much will she be able to deduct for charitable contributions on Schedule A (Form 1040), Itemized Deductions?
1,528

To claim the Clean Vehicle Credit, the qualifying electric vehicle must have been assembled in North America after which date?
Yes, after August 16, 2022, a new clean vehicle must have had its final assembly in North America to be eligible for the credit.

Joshua and Donna were married. Mya has been their tax preparer for many years. During a meeting with Mya, they disclosed they recently divorced. Mya explained to both of them that a conflict of interest has arisen in their case. They decided to waive the conflict, and both signed separate waivers to continue with Mya as their tax preparer. What is the minimum amount of time that Mya is required to retain the waivers?
The IRS requires tax practitioners who obtain written conflict of interest waivers from taxpayers to retain the waivers for at least 36 months from the date the representation concludes, and to provide the waivers to the IRS upon request.

When is a tax preparer required to complete and submit Form 8867, Paid Preparer’s Due Diligence Checklist?
Paid tax return preparers are required to exercise due diligence when preparing any taxpayer’s return or claim for refund. As part of exercising due diligence, they must interview the taxpayer, ask adequate questions, and obtain appropriate and sufficient information to determine correct reporting of income, claiming of tax benefits (such as deductions and credits), and compliance with the tax laws.
Due to tax law changes from the Protecting Americans from Tax Hikes (PATH) Act of 2015, paid tax return preparers must also meet specific due diligence requirements when preparing returns and claims for refund involving the:
Earned Income Credit (EIC).
American Opportunity Tax Credit (AOTC).
Child Tax Credit (CTC), including the: Additional Child Tax Credit (ACTC).Other Dependent Credit (ODC).
Taxpayers using the head of household (HOH) filing status.
Tax preparers fulfill these specific due diligence requirements by meeting ALL four requirements listed below:
Complete and submit Form 8867, Paid Preparer’s Due Diligence Checklist.
Complete and keep all worksheets used to compute any of these four credits.
Satisfy the knowledge requirement.
Satisfy the documentation requirement.

Ross filed a tax return for Allie. During the interview conducted by Ross, Allie stated that she had made a charitable contribution of artwork in the amount of $20,000 during the tax year, when in fact she had not made this charitable contribution. Ross did not inquire about the existence of a qualified appraisal or complete a Form 8283, Noncash Charitable Contributions. Ross reported the deduction on the return, signed the return as the paid preparer, and charged $500 for the tax preparation. The IRS audited the client and Ross will face a penalty for understatement of a taxpayer’s tax liability. What is the penalty?
$560

Ryan’s client told him that he had additional income for a side job but does not want to report the income since he is paid under the table and he did not receive a Form 1099. Ryan filed the return and chose not to report the income since he didn’t have any documentation or proof of the income. As a result, the client paid less tax. Ryan charged $500 for the tax preparation. The IRS audited the client; they can assess what penalty to Ryan as a paid preparer?
5,000

Pat started a new business on September 1, 2022. He is self-employed. He drove 500 business miles from September 1 – December 31, 2022. He qualifies to use the standard mileage rate. What amount will be entered on line 9 of his Schedule C (Form 1040)?
312.50

Juan is self-employed. During the tax year, he had the following income and expenses:
Gross receipts: $80,000
Advertising: $1,000
Office expense: $300
Rent: $10,000
Liability insurance: $3,000
Bookkeeping fees: $500
Utilities: $2,000
Business meals purchased at restaurants: $1,000
What is Juan’s net profit (or loss) for the tax year?
62,000

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