Deductions and Credits Flashcards
7 cards from real IRS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Deductions and Credits flashcards as text
A taxpayer has a net capital loss of $8,000. How much can be deducted against ordinary income in the current year?
Answer: $3,000
Net capital losses can offset ordinary income up to $3,000 per year; the remaining $5,000 carries forward.
The Saver's Credit (Retirement Savings Contributions Credit) provides a credit rate of up to what percentage?
Answer: 50%
The Saver's Credit provides a credit of 10%, 20%, or 50% of qualifying retirement contributions based on AGI.
A taxpayer who is blind and single may claim an additional standard deduction of how much in 2023?
Answer: $1,850
Single (or head of household) taxpayers who are blind or age 65+ receive an additional $1,850 standard deduction in 2023.
The Energy Efficient Home Improvement Credit (25C) was enhanced under the Inflation Reduction Act to cover what percentage of qualifying costs?
Answer: 30%
The Inflation Reduction Act increased the 25C credit to 30% of qualifying energy-efficient improvement costs.
Excess charitable contribution carryovers must be used within how many years?
Answer: 5 years
Charitable contribution carryovers that exceed the AGI limitation may be carried forward for up to five subsequent tax years.
Which of the following taxpayers is NOT eligible for the American Opportunity Tax Credit?
Answer: A graduate student in the fifth year of higher education
The AOTC is only available for the first four years of postsecondary education; a fifth-year student is ineligible.
A taxpayer contributes $3,000 to a Health Savings Account (HSA). This contribution is treated as:
Answer: An above-the-line deduction reducing AGI
HSA contributions by the taxpayer (not through payroll) are an above-the-line deduction, reducing AGI directly.