H&R BLOCK INCOME TAX COURSE FINAL
TEST PAPER 2026 FULL QUESTIONS WITH
ACCURATE ANSWER SOLUTIONS
CERTIFICATION PREPARATION REVIEW
FILE GRADED A+
⩥ Qualifications for Earned Income Credit. Answer: (1) Have a valid
SSN. (2) Not filing married filing separately. (3) Be a US citizen. (4)
Not file Form 2555. (5) Investment income of $3150 or less. (6) Have
earned income.
⩥ Qualifications for EIC without QC. Answer: (1) Between 25 and 65
years old. (2) Cannot be claimed as a dependent by another taxpayer. (3)
Not a QC of another person. (4) Live in US over half the year. (5) AGI
of less than $13660 ($18740 if MFJ).
⩥ Qualifications for EIC with QC. Answer: (1) Have a QC. (2) QC not
claimed by more than one person. (3) Not a QC of another person. (4)
AGI less than: $36052 ($41132 MFJ) w/ 1 QC; $40964 ($46044 MFJ)
w/ 2 QC; $43998 ($49078 MFJ) w/ 3+ QC.
⩥ Relationship Test for QC. Answer: (1) Son, daughter, stepchild,
eligible foster child, adopted child, or descendant. (2) Brother, sister,
half-brother, half-sister, stepbrother, stepsister, or descendant.
,⩥ Age Test for QC. Answer: (1) Under 19 and younger than taxpayer.
(2) Full-time student under 24 and younger than taxpayer. (3)
Permanently and totally disabled.
⩥ Residency Test for QC. Answer: Must have lived with taxpayer for
more than half the year.
⩥ Joint Return Test for QC. Answer: The QC cannot file a joint return,
unless merely to claim a refund.
⩥ Investment Income. Answer: Taxable and exempt interest; taxable
dividends; net capital gain income; net nonbusiness rents and royalties;
net passive income.
⩥ EIC Due Diligence. Answer: (1) Compute and submit an eligibility
checklist. (2) Compute the amount of credit. (3) Comply with the
knowledge requirement. (4) Retain records.
⩥ Form 8867. Answer: Paid Preparer's EIC Checklist
⩥ Basis. Answer: A measure of the taxpayer's investment in property for
tax purposes.
,⩥ Cost. Answer: Includes the cash paid, the fair market value of services
rendered, and the fair market value of property traded in exchange for
the property.
⩥ Adjusted Basis. Answer: The original basis PLUS the cost of
improvements; the cost of restoration after a casualty; assessments for
local improvements MINUS any discount, rebate, or reimbursement of
any portion of the purchase price; insurance reimbursements for property
damages; the amount of casualty or other losses deducted on the return
for any year; depletion or depreciation allowed or allowable; any gain
that is not reported in the year realized.
⩥ Holding Period. Answer: The length of time an asset has been owned.
⩥ Tax Rate of Long-Term Capital Gains. Answer: 15%
⩥ Maximum Rate. Answer: 28%. Applies to long-term gain from the
sale of collectibles; certain gain from the sale of 1202 stock, also called
qualified small business stock.
⩥ Form 1099-B. Answer: Stocks or bonds sold through a broker.
⩥ Capital Gain Distributions. Answer: Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts.
, ⩥ Mutual Fund. Answer: (1) An open-ended investment company that
invests money of its shareholders in a usually diversified group of
securities of other corporations. (2) A company that is in the business of
buying and selling stocks and sharing its income with those invested in
it.
⩥ Nontaxable Distributions. Answer: Stock dividend distributions that
are not taxable.
⩥ Ordinary Dividends. Answer: Paid out of the earnings and profits of
the corporation.
⩥ Ordinary Income (Loss). Answer: Income that is fully includable in
gross income and that does not have the characteristics of capital gain or
loss.
⩥ Qualified Dividends. Answer: Dividends received on shares of
common stock held by the taxpayer for more than 60 days of the 120-
day period beginning 60 days before the ex-dividend date.
⩥ Returns of Capital. Answer: A return of a shareholder's investment
generally made because an excess amount of capital has been
accumulated.
TEST PAPER 2026 FULL QUESTIONS WITH
ACCURATE ANSWER SOLUTIONS
CERTIFICATION PREPARATION REVIEW
FILE GRADED A+
⩥ Qualifications for Earned Income Credit. Answer: (1) Have a valid
SSN. (2) Not filing married filing separately. (3) Be a US citizen. (4)
Not file Form 2555. (5) Investment income of $3150 or less. (6) Have
earned income.
⩥ Qualifications for EIC without QC. Answer: (1) Between 25 and 65
years old. (2) Cannot be claimed as a dependent by another taxpayer. (3)
Not a QC of another person. (4) Live in US over half the year. (5) AGI
of less than $13660 ($18740 if MFJ).
⩥ Qualifications for EIC with QC. Answer: (1) Have a QC. (2) QC not
claimed by more than one person. (3) Not a QC of another person. (4)
AGI less than: $36052 ($41132 MFJ) w/ 1 QC; $40964 ($46044 MFJ)
w/ 2 QC; $43998 ($49078 MFJ) w/ 3+ QC.
⩥ Relationship Test for QC. Answer: (1) Son, daughter, stepchild,
eligible foster child, adopted child, or descendant. (2) Brother, sister,
half-brother, half-sister, stepbrother, stepsister, or descendant.
,⩥ Age Test for QC. Answer: (1) Under 19 and younger than taxpayer.
(2) Full-time student under 24 and younger than taxpayer. (3)
Permanently and totally disabled.
⩥ Residency Test for QC. Answer: Must have lived with taxpayer for
more than half the year.
⩥ Joint Return Test for QC. Answer: The QC cannot file a joint return,
unless merely to claim a refund.
⩥ Investment Income. Answer: Taxable and exempt interest; taxable
dividends; net capital gain income; net nonbusiness rents and royalties;
net passive income.
⩥ EIC Due Diligence. Answer: (1) Compute and submit an eligibility
checklist. (2) Compute the amount of credit. (3) Comply with the
knowledge requirement. (4) Retain records.
⩥ Form 8867. Answer: Paid Preparer's EIC Checklist
⩥ Basis. Answer: A measure of the taxpayer's investment in property for
tax purposes.
,⩥ Cost. Answer: Includes the cash paid, the fair market value of services
rendered, and the fair market value of property traded in exchange for
the property.
⩥ Adjusted Basis. Answer: The original basis PLUS the cost of
improvements; the cost of restoration after a casualty; assessments for
local improvements MINUS any discount, rebate, or reimbursement of
any portion of the purchase price; insurance reimbursements for property
damages; the amount of casualty or other losses deducted on the return
for any year; depletion or depreciation allowed or allowable; any gain
that is not reported in the year realized.
⩥ Holding Period. Answer: The length of time an asset has been owned.
⩥ Tax Rate of Long-Term Capital Gains. Answer: 15%
⩥ Maximum Rate. Answer: 28%. Applies to long-term gain from the
sale of collectibles; certain gain from the sale of 1202 stock, also called
qualified small business stock.
⩥ Form 1099-B. Answer: Stocks or bonds sold through a broker.
⩥ Capital Gain Distributions. Answer: Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts.
, ⩥ Mutual Fund. Answer: (1) An open-ended investment company that
invests money of its shareholders in a usually diversified group of
securities of other corporations. (2) A company that is in the business of
buying and selling stocks and sharing its income with those invested in
it.
⩥ Nontaxable Distributions. Answer: Stock dividend distributions that
are not taxable.
⩥ Ordinary Dividends. Answer: Paid out of the earnings and profits of
the corporation.
⩥ Ordinary Income (Loss). Answer: Income that is fully includable in
gross income and that does not have the characteristics of capital gain or
loss.
⩥ Qualified Dividends. Answer: Dividends received on shares of
common stock held by the taxpayer for more than 60 days of the 120-
day period beginning 60 days before the ex-dividend date.
⩥ Returns of Capital. Answer: A return of a shareholder's investment
generally made because an excess amount of capital has been
accumulated.
