Tax Consulting Tax Credits and Deductions 2

Question 1

What is the maximum American Opportunity Tax Credit (AOTC) available per eligible student per year?

Accepted Answer

$2,500

Answer

The AOTC provides a maximum credit of $2,500 per eligible student for the first four years of higher education, with 40% of the credit being refundable.

Question 2

How does the self-employed health insurance deduction differ from the itemized medical expense deduction?

Accepted Answer

It is an above-the-line deduction not subject to the 7.5% AGI floor

Answer

Self-employed individuals can deduct 100% of health insurance premiums as an above-the-line adjustment to income, avoiding the 7.5% AGI threshold required for itemized medical deductions.

Question 3

At what AGI level does the Child Tax Credit begin to phase out for single filers in 2024?

Accepted Answer

$200,000

Answer

The Child Tax Credit begins phasing out at $200,000 AGI for single filers ($400,000 for married filing jointly), reducing by $50 for each $1,000 over the threshold.

Question 4

What is the primary purpose of the Section 179 expense deduction?

Accepted Answer

To allow immediate expensing of qualifying business property rather than depreciation

Answer

Section 179 allows businesses to immediately deduct the full cost of qualifying business equipment and property up to annual limits, rather than depreciating it over multiple years.

Question 5

Which of the following expenses does NOT qualify for the Lifetime Learning Credit?

Accepted Answer

On-campus room and board

Answer

Room and board is not a qualifying expense for the Lifetime Learning Credit; only tuition, required fees, and books required as a condition of enrollment qualify.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting Tax Credits and Deductions 2