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Deductions and Credits Flashcards

6 cards from real Tax Preparation practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Deductions and Credits flashcards as text

  1. A taxpayer pays $8,000 in state and local taxes. Under the TCJA, how much can they deduct on Schedule A?

    Answer: $5,000

    The TCJA capped the state and local tax (SALT) deduction at $10,000 ($5,000 for MFS), so only $5,000 is deductible if filing Married Filing Separately.

  2. Which tax credit directly reduces a taxpayer's tax bill dollar-for-dollar?

    Answer: Tax credits

    Tax credits reduce the actual tax owed dollar-for-dollar, whereas deductions reduce taxable income and save tax only at the marginal rate.

  3. What is the maximum Saver's Credit percentage for a single taxpayer with the lowest AGI?

    Answer: 50%

    The Retirement Savings Contributions Credit (Saver's Credit) is up to 50% of contributions for the lowest income tier, based on AGI.

  4. A self-employed taxpayer can deduct 100% of health insurance premiums paid for themselves and their family as:

    Answer: An adjustment to income on Schedule 1

    Self-employed individuals deduct health insurance premiums as an above-the-line adjustment to income, reducing AGI.

  5. Which of the following taxes paid is deductible as an itemized deduction?

    Answer: Real estate property taxes

    Real estate property taxes are deductible as part of the SALT deduction (subject to the $10,000 cap) on Schedule A.

  6. The Premium Tax Credit (PTC) is available to taxpayers who purchase insurance through:

    Answer: The Health Insurance Marketplace (Exchange)

    The Premium Tax Credit is available only for coverage purchased through the ACA Marketplace and is based on household income relative to the federal poverty level.

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