CTA Individual Income Tax 3

Question 1

Which of the following is a 'above-the-line' deduction for individual taxpayers?

Accepted Answer

Student loan interest

Answer

Student loan interest is an above-the-line deduction, meaning it reduces adjusted gross income regardless of whether the taxpayer itemizes.

Question 2

What is the tax treatment of a Roth IRA qualified distribution?

Accepted Answer

Tax-free and penalty-free

Answer

Qualified Roth IRA distributions are completely tax-free and penalty-free because contributions were made with after-tax dollars.

Question 3

Which of the following Social Security benefits are potentially taxable?

Accepted Answer

Up to 85% of benefits if combined income exceeds thresholds

Answer

Up to 85% of Social Security benefits may be taxable if the taxpayer's combined income exceeds the applicable threshold.

Question 4

What is the net investment income tax (NIIT) rate imposed by the ACA on high-income individuals?

Accepted Answer

3.8%

Answer

The Net Investment Income Tax is 3.8% on the lesser of net investment income or the excess of MAGI over the threshold amount.

Question 5

Which deduction allows self-employed individuals to deduct health insurance premiums?

Accepted Answer

Self-employed health insurance deduction (above-the-line)

Answer

Self-employed individuals may deduct 100% of health insurance premiums as an above-the-line deduction under IRC Section 162(l).

CTA - Certified Tax Advisor Practice Test