Question 1

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

Accepted Answer

False

Question 2

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.A self-employed individual cannot be eligible to participate in a plan.

Accepted Answer

False

Question 3

Self employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self employment taxes paid.An above-the-line deduction for the employer portion of the SE tax is available.

Accepted Answer

Self-employed taxpayers cannot choose between a deduction or a credit for the employer portion of self-employment taxes. They are allowed an above-the-line deduction for the employer portion of the self-employment tax.

Question 4

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.The early withdrawal penalty is treated as an above-the-line deduction.

Accepted Answer

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

Question 5

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 definition of qualifying expenses is more limited for the qualified educational expense deduction, as it only includes tuition, fees, books, and supplies, while the education loan interest expense deduction includes a wider range of expenses, such as room and board, transportation costs, and other necessary expenses incurred while attending school.

Question 6

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 7

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 criteria of being employed or self-employed for a specific amount of time after the move. This time period is usually 39 weeks within the first 12 months following the move for a job change, or for self-employed individuals, 78 weeks during the first 24 months following the move.

Question 8

All investment expenses are itemized deductions.Rental/royalty deductions are above the line.

Accepted Answer

Investment expenses may be subject to limitations and must be itemized deductions, while rental/royalty deductions are considered above the line deductions and do not require itemization.

Question 9

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

Accepted Answer

According to IRS Publication 502, taxpayers may deduct the cost of travel for the primary purpose of receiving essential and deductible medical care, including transportation expenses such as the actual cost of transportation, fares for taxis or other types of transportation, as well as the cost of lodging and meals while away from home for medical treatment.

Question 10

The itemized deduction for taxes includes all types of state,local,and foreign taxes.The deduction is limited to state income (or sales taxes) ,property taxes and personal property taxes based on value.

Accepted Answer

The answer of The itemized deduction for taxes includes all...

Question 11

Rental or royalty expenses are deductible "for" AGI.

Accepted Answer

Rental or royalty expenses are considered "above the line" deductions, meaning they are deducted from your income before your Adjusted Gross Income (AGI) is calculated. Therefore, they are deductible "for" AGI.

Question 12

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

Accepted Answer

The IRS requires that business expenses be "ordinary and necessary" meaning they must be common and accepted in your industry and helpful for earning a profit.

Question 13

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 taxpayers who incur significant medical expenses that exceed a certain threshold of their income. It is not specific to doctors and medical practitioners.

Question 14

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 purposes of the deduction of interest on educational loans include 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, as defined by the IRS.

Question 15

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.Interest is deductible on up to $100,000 of home-equity debt.

Accepted Answer

The Tax Cuts and Jobs Act of 2017 changed the mortgage interest deduction limits to $750,000 for acquisition debt and eliminated the deduction for home-equity debt unless used to buy, build, or substantially improve the home.

Question 16

All business expense deductions are claimed above the line.Employee business expenses are itemized subject to a 2% of AGI floor.

Accepted Answer

Employee business expenses are subject to a 2% of AGI floor and are itemized deductions taken below the line on Schedule A of Form 1040.

Question 17

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

Accepted Answer

Business expenses must be directly related to a business activity in order to be deductible on taxes. Expenses that are not directly related may be considered personal expenses and cannot be deducted.

Question 18

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

Accepted Answer

The profit motive is the driving force behind business activities, whereas personal activities are typically motivated by personal fulfillment or satisfaction rather than financial gain.

Question 19

Taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes.Taxpayers may elect to deduct state and local sales taxes in lieu of deducting state and local income taxes.

Accepted Answer

This is true. Taxpayers have the option to deduct either state and local sales taxes or state and local income taxes, but not both, on their federal income tax returns.

Question 20

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.10% (7.5% for taxpayer or spouse age 65 or older) of AGI is the floor limit.

Accepted Answer

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by 7.5% of the taxpayer's AGI, not five percent.

Quiz 6: Individual Deductions