Taxation for Individuals Flashcards
7 cards from real IRS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Taxation for Individuals flashcards as text
A single taxpayer has $80,000 in wages and $5,000 in qualified dividends. How are the qualified dividends taxed for a taxpayer in the 22% ordinary income bracket?
Answer: At 15% preferential rate
Qualified dividends for taxpayers in the 22% bracket are taxed at the 15% preferential capital gains rate.
Which of the following expenses is deductible as a medical expense on Schedule A?
Answer: Prescription eyeglasses and contact lenses
Prescription eyeglasses and contact lenses qualify as deductible medical expenses because they correct a medical condition.
A taxpayer sells their primary residence after living there for 18 months. What is the maximum capital gains exclusion available?
Answer: $125,000 — prorated for time lived there
The $250,000 exclusion ($500,000 MFJ) is prorated when the taxpayer fails to meet the full 2-year requirement due to a qualifying unforeseen circumstance.
What is the 'kiddie tax' and when does it apply?
Answer: A tax that applies a parent's rate to a child's unearned income above a threshold
The kiddie tax taxes a child's net unearned income above the threshold at the parent's marginal rate to prevent income shifting.
A married couple filing jointly has $300,000 in net investment income and $250,000 in modified AGI. What additional tax may apply?
Answer: 3.8% Net Investment Income Tax on the lesser of NII or MAGI over threshold
The 3.8% NIIT applies to the lesser of net investment income or the amount by which MAGI exceeds $250,000 for MFJ filers.
Which of the following is NOT a qualifying relative for dependency purposes?
Answer: A sibling who is age 25, not a student, and earns $8,000
A sibling who earns $8,000 fails the gross income test ($4,700 limit for 2023) required for qualifying relative status.
A taxpayer contributes $6,500 to a traditional IRA but is covered by a workplace retirement plan and has AGI of $85,000 (single). What portion is deductible?
Answer: Not deductible — income exceeds phaseout range
For 2023, the traditional IRA deduction phases out for single filers covered by a workplace plan between $73,000 and $83,000 AGI, so $85,000 exceeds the range and no deduction is allowed.