Question 1

All business expense deductions are claimed above the line.

Accepted Answer

Some business expense deductions are claimed above the line (such as contributions to retirement plans or self-employed health insurance premiums), while others are claimed below the line as itemized deductions (such as office supplies or advertising expenses).

Question 2

All reasonable moving expenses are deductible if the move is a minimum of 35 miles in distance.

Accepted Answer

False

Question 3

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.

Accepted Answer

False

Question 4

All investment expenses are itemized deductions.

Accepted Answer

Investment expenses used to be itemized deductions, but they were eliminated as part of the Tax Cuts and Jobs Act that went into effect in 2018.

Question 5

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

Accepted Answer

The answer of An individual who forfeits a penalty for...

Question 6

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Accepted Answer

According to the IRS, taxpayers can deduct travel expenses for medical care if the primary purpose of the trip is to receive medical care that is essential to their health or the health of their dependents. This includes deducting the cost of transportation, lodging, and meals. However, the deduction is subject to certain limitations and requirements outlined by the IRS.

Question 7

Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

Accepted Answer

Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

Question 8

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Accepted Answer

The phrase "ordinary and necessary" has a specific meaning in tax law, which is that expenses must be both common and accepted in a particular industry and also helpful and appropriate for conducting business in order to be deductible. Essentially, the expense must be necessary for conducting business and generating a profit.

Question 9

To be deductible, business expenses must be directly related to a business activity.

Accepted Answer

Business expenses must have a clear connection to a business activity in order to be considered deductible. Expenses that are solely personal in nature are not deductible.

Question 10

Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan.

Accepted Answer

The answer of Self employed taxpayers can deduct the cost...

Question 11

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

Accepted Answer

The qualified educational expense deduction only allows for expenses related to tuition, fees, books, and supplies while the education loan interest expense deduction allows for a broader range of expenses including room and board.

Question 12

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

Accepted Answer

The medical expense deduction is designed to provide relief for individuals who have incurred substantial medical expenses, not specifically for doctors and medical practitioners.

Question 13

Self employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self employment taxes paid.

Accepted Answer

Self-employed taxpayers must pay both the employee and employer portions of Social Security and Medicare taxes, but they can only claim a deduction for the employer-equivalent portion of these taxes on their income tax return. There is no option to claim a credit for these taxes.

Question 14

Rental or royalty expenses are deductible "for" AGI.

Accepted Answer

Rental or royalty expenses are considered "above the line" deductions and are deductible for adjusted gross income (AGI).

Question 15

In 2013, taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.

Accepted Answer

This is true according to the Internal Revenue Service (IRS) for the tax year 2013. However, this election is no longer available for tax years starting in 2014 and later.

Question 16

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

Accepted Answer

Qualified education expenses for the deduction of interest on educational loans are those paid for the education of the taxpayer, spouse, or dependent to attend a post-secondary institution of higher education.

Question 17

The profit motive distinguishes "business" activities from "personal" activities.

Accepted Answer

The profit motive is the driving force behind business activities, while personal activities are typically motivated by personal interest or fulfillment rather than profit.

Question 18

To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move.

Accepted Answer

To deduct a moving expense, the taxpayer must meet the time test, which requires being employed or self-employed for at least 39 weeks during the 12 months following the move.

Question 19

The itemized deduction for taxes includes all types of state, local, and foreign taxes.

Accepted Answer

The itemized deduction for taxes is limited to state and local taxes, and does not include all types of foreign taxes. It primarily includes state and local income taxes or sales taxes, and property taxes, but there are limitations and not all foreign taxes are deductible under this category.

Question 20

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.

Accepted Answer

The answer of Taxpayers are allowed to deduct mortgage interest...

Quiz 6: Individual Deductions

All business expense deductions are claimed above the line.

All reasonable moving expenses are deductible if the move is a minimum of 35 miles in distance.

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.

All investment expenses are itemized deductions.

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

To be deductible, business expenses must be directly related to a business activity.

Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan.

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

Self employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self employment taxes paid.

Rental or royalty expenses are deductible "for" AGI.

In 2013, taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

The profit motive distinguishes "business" activities from "personal" activities.

To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move.

The itemized deduction for taxes includes all types of state, local, and foreign taxes.

Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.