CTA Tax Credits and Deductions 2 — Questions and Answers
Question 1: Which tax credit provides a dollar-for-dollar reduction in tax liability for contributions to retirement savings plans by lower-income taxpayers?
- Child Tax Credit
- Saver's Credit (Retirement Savings Contributions Credit) (Correct answer)
- Premium Tax Credit
- Adoption Credit
Correct answer: Saver's Credit (Retirement Savings Contributions Credit)
The Saver's Credit provides a credit of 10-50% of eligible contributions to retirement plans for taxpayers with income below specified limits.
Question 2: Which of the following medical expenses is deductible on Schedule A?
- Gym membership for general health
- Cosmetic surgery for appearance only
- Prescription medications (Correct answer)
- Weight-loss program for general wellness
Correct answer: Prescription medications
Prescription medications qualify as deductible medical expenses on Schedule A, subject to the 7.5% AGI floor.
Question 3: The state and local tax (SALT) deduction is currently capped at what amount for most taxpayers?
- $5,000
- $10,000 (Correct answer)
- $15,000
- Unlimited
Correct answer: $10,000
The TCJA limited the SALT deduction to $10,000 ($5,000 for married filing separately) through at least 2025.
Question 4: The Business Energy Investment Tax Credit (ITC) under Section 48 incentivizes investment in which type of property?
- Conventional energy generation equipment
- Qualifying renewable energy property like solar panels (Correct answer)
- Natural gas processing equipment
- Real estate improvements
Correct answer: Qualifying renewable energy property like solar panels
Section 48 provides an investment tax credit for qualifying renewable energy property including solar, wind, and other clean energy installations.
Question 5: Which credit is available to employers who provide qualified family and medical leave to employees?
- Work Opportunity Tax Credit (WOTC)
- Employer Credit for Paid Family and Medical Leave (Section 45S) (Correct answer)
- Disabled Access Credit
- Small Employer Health Insurance Credit
Correct answer: Employer Credit for Paid Family and Medical Leave (Section 45S)
IRC Section 45S provides a credit to employers who pay qualifying employees at least 50% of wages during family and medical leave.
Question 6: Charitable contribution deductions for appreciated capital gain property donated to a public charity are generally limited to what percentage of AGI?
- 20% of AGI
- 30% of AGI (Correct answer)
- 50% of AGI
- 60% of AGI
Correct answer: 30% of AGI
Contributions of appreciated capital gain property to public charities are generally limited to 30% of AGI, with a 5-year carryforward for excess amounts.
CTA Tax Credits and Deductions 2
Which tax credit provides a dollar-for-dollar reduction in tax liability for contributions to retirement savings plans by lower-income taxpayers?