IRS Deductions and Credits 5

Question 1

A taxpayer has a net capital loss of $8,000. How much can be deducted against ordinary income in the current year?

Accepted Answer

$3,000

Answer

Net capital losses can offset ordinary income up to $3,000 per year; the remaining $5,000 carries forward.

Question 2

The Saver's Credit (Retirement Savings Contributions Credit) provides a credit rate of up to what percentage?

Accepted Answer

50%

Answer

The Saver's Credit provides a credit of 10%, 20%, or 50% of qualifying retirement contributions based on AGI.

Question 3

A taxpayer who is blind and single may claim an additional standard deduction of how much in 2023?

Accepted Answer

$1,850

Answer

Single (or head of household) taxpayers who are blind or age 65+ receive an additional $1,850 standard deduction in 2023.

Question 4

The Energy Efficient Home Improvement Credit (25C) was enhanced under the Inflation Reduction Act to cover what percentage of qualifying costs?

Accepted Answer

30%

Answer

The Inflation Reduction Act increased the 25C credit to 30% of qualifying energy-efficient improvement costs.

Question 5

Excess charitable contribution carryovers must be used within how many years?

Accepted Answer

5 years

Answer

Charitable contribution carryovers that exceed the AGI limitation may be carried forward for up to five subsequent tax years.

(IRS) Internal Revenue Service Certified Practice Test