CTA Tax Credits and Deductions

Question 1

The Earned Income Tax Credit (EITC) is available to taxpayers who:

Accepted Answer

Have earned income below certain thresholds and meet other eligibility requirements

Answer

The EITC is a refundable credit available to low-to-moderate income workers with earned income and investment income below specified limits.

Question 2

Which of the following credits directly reduces the tax liability dollar-for-dollar?

Accepted Answer

Tax credit

Answer

A tax credit reduces the actual tax liability dollar-for-dollar, making it more valuable than a deduction of the same amount.

Question 3

The American Opportunity Tax Credit (AOTC) provides a maximum credit of how much per eligible student?

Accepted Answer

$2,500

Answer

The AOTC provides a maximum credit of $2,500 per eligible student for the first four years of post-secondary education.

Question 4

Which deduction allows taxpayers to deduct up to $300 ($600 MFJ) for charitable contributions without itemizing?

Accepted Answer

Above-the-line charitable deduction for cash contributions

Answer

A temporary above-the-line deduction allowed non-itemizers to deduct cash charitable contributions, though its permanent status has varied by year.

Question 5

The Child and Dependent Care Credit provides a credit based on what percentage of qualifying expenses?

Accepted Answer

20-35% depending on AGI

Answer

The Child and Dependent Care Credit is 20-35% of qualifying expenses up to $3,000 for one qualifying person, with the percentage decreasing as AGI increases.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Tax Credits and Deductions