Tax Consulting Tax Credits and Deductions 3

Question 1

Which of the following credits is available to individual taxpayers but NOT to C corporations?

Accepted Answer

Earned Income Tax Credit (EITC)

Answer

The Earned Income Tax Credit is exclusively available to individuals and families with earned income below certain thresholds; it cannot be claimed by any type of corporation.

Question 2

What is the maximum Qualified Business Income (QBI) deduction percentage available to eligible pass-through businesses?

Accepted Answer

20%

Answer

The QBI deduction allows eligible sole proprietors, partnerships, S corporations, and some trusts to deduct up to 20% of qualified business income, subject to income and other limitations.

Question 3

Medical expenses are deductible as an itemized deduction only to the extent they exceed what percentage of AGI?

Accepted Answer

7.5%

Answer

Taxpayers may deduct unreimbursed medical expenses that exceed 7.5% of their adjusted gross income; only the amount above this floor is deductible.

Question 4

The Work Opportunity Tax Credit (WOTC) is designed to incentivize employers to hire which group?

Accepted Answer

Members of targeted groups facing significant employment barriers

Answer

The WOTC provides a federal tax credit to employers who hire from targeted groups facing significant barriers to employment, including veterans, ex-felons, long-term SNAP recipients, and others.

Question 5

Under the passive activity loss rules (IRC Section 469), passive losses can generally only offset:

Accepted Answer

Passive activity income only

Answer

Under IRC Section 469, passive activity losses can only be deducted against passive activity income; excess passive losses are suspended and carried forward to future years.

Tax Consulting Practice Test

Tax Consulting Practice Test

Tax Consulting Tax Credits and Deductions 3