CTP CTP Tax Credits, Deductions & Exemptions 2

Question 1

The American Opportunity Tax Credit (AOTC) provides a maximum annual credit of how much for qualified education expenses?

Accepted Answer

$2,500

Answer

The AOTC provides up to $2,500 per eligible student per year for the first four years of post-secondary education, with 40% ($1,000) potentially refundable.

Question 2

The Section 179 deduction allows a business to:

Accepted Answer

Immediately expense the cost of qualifying property rather than depreciating it over time

Answer

IRC §179 allows businesses to immediately deduct the full purchase price of qualifying equipment and software in the year it is placed in service, up to an annual limit.

Question 3

The Lifetime Learning Credit (LLC) differs from the American Opportunity Tax Credit in that it:

Accepted Answer

Is available for an unlimited number of years and applies to a broader range of courses

Answer

The Lifetime Learning Credit has no limit on the number of years it can be claimed and covers any courses that improve job skills, unlike the AOTC which is limited to the first four years of college.

Question 4

A taxpayer may deduct home office expenses only if the space is used:

Accepted Answer

Regularly and exclusively for business as the principal place of business or for meeting clients

Answer

IRC §280A requires that a home office be used regularly and exclusively for business as the taxpayer's principal place of business or to meet clients in order to be deductible.

Question 5

The net operating loss (NOL) deduction under TCJA is limited to what percentage of taxable income in carryforward years?

Accepted Answer

80%

Answer

TCJA limits NOL carryforwards to 80% of taxable income in the year the loss is applied, eliminating the previous two-year carryback and allowing unlimited carryforward.

(CTP) Certified Tax Professional Practice Test

(CTP) Certified Tax Professional Practice Test

CTP CTP Tax Credits, Deductions & Exemptions 2