Intuit Academy Tax Level 1 | 335 Complete Questions And Correct Answers With
Verified Solution | Newest Update/Grade A+ Assured
Question 1
Which of the following is considered a "below the line" deduction?
A) Student loan interest
B) Educator expenses
C) Standard deduction
D) Health Savings Account (HSA) deduction
E) Self-employed health insurance deduction
Correct Answer: C) Standard deduction
Rationale: "Below the line" deductions are those taken after Adjusted Gross Income (AGI)
has been calculated. The standard deduction or itemized deductions are used to reduce AGI
to arrive at taxable income. Options A, B, D, and E are "above the line" deductions, also
known as Adjustments to Income.
Question 2
Eligible educators can deduct up to how much in qualified expenses paid during the tax year?
A) $100
B) $200
C) $250
D) $500
E) $1,000
Correct Answer: C) $250
Rationale: The educator expense deduction allows eligible K-12 teachers and other
educators to deduct up to $250 for unreimbursed costs for books, supplies, computer
equipment, and other supplementary materials used in the classroom.
Question 3
Which of the following medical expenses is ineligible for reimbursement from an HSA, Archer
MSA, or MA MSA?
A) Prescription drugs
B) Breast enhancement
C) Dental treatment
D) Vision care
E) Psychiatric care
Correct Answer: B) Breast enhancement
Rationale: Qualified medical expenses must be for the diagnosis, cure, mitigation,
treatment, or prevention of disease. Cosmetic surgery, such as breast enhancement, is
generally considered an ineligible expense unless it is necessary to improve a deformity
arising from a congenital abnormality, personal injury, or disfiguring disease.
, 2
Question 4
What is the tax rate for net capital gains if a Married Filing Jointly taxpayer has an income less
than $80,800?
A) 0%
B) 5%
C) 10%
D) 15%
E) 20%
Correct Answer: A) 0%
Rationale: For taxpayers who file as Married Filing Jointly and have taxable income below
the applicable threshold (such as $80,800 in the 2021/2022 tax era), the long-term capital
gains tax rate is 0%. This is designed to provide tax relief for lower-to-middle income
earners on investment growth.
Question 5
To claim a child as a dependent, they must meet the qualifying child test or the:
A) Support test
B) Relationship test
C) Qualifying relative test
D) Gross income test
E) Joint return test
Correct Answer: C) Qualifying relative test
Rationale: If an individual does not meet all the specific criteria to be a "qualifying child"
(such as age or residency requirements), they may still be claimed as a dependent if they
meet the "qualifying relative" test, which includes requirements for support, relationship,
and gross income.
Question 6
Ordinary dividends are generally taxed at what rate?
A) A flat 15% rate
B) The same rate as the ordinary income tax rate
C) The capital gains rate
D) 0% for all taxpayers
E) A flat 20% rate
Correct Answer: B) The same rate as the ordinary income tax rate
Rationale: While "qualified dividends" may be taxed at lower capital gains rates, "ordinary
dividends" are treated as standard income and taxed according to the taxpayer's specific
marginal income tax bracket.
, 3
Question 7
Distributions from an HSA, Archer MSA, or MA MSA are non-taxable when used for:
A) General living expenses
B) Qualified medical expenses of your dependent
C) Luxury spa treatments
D) Non-prescription vitamins
E) Over-the-counter supplements without a prescription
Correct Answer: B) Qualified medical expenses of your dependent
Rationale: Distributions from health-related savings accounts are tax-free if used for
qualified medical expenses for the account holder, their spouse, or their dependents. If used
for non-qualified expenses, the distribution is subject to income tax and potential penalties.
Question 8
Which residency status applies to an individual who is neither a U.S. citizen nor a resident alien
for tax purposes?
A) Resident alien
B) Dual-status alien
C) Non-resident alien
D) Permanent resident
E) Expatriate
Correct Answer: C) Non-resident alien
Rationale: A non-resident alien is an individual who has not passed the Green Card test or
the Substantial Presence test and is not a U.S. citizen. They are taxed only on income from
U.S. sources.
Question 9
What two pieces of information must a taxpayer know to accurately calculate their tax amount?
A) Gross income and age
B) Taxable income and filing status
C) Net income and state of residence
D) Total assets and number of dependents
E) Adjusted Gross Income and occupation
Correct Answer: B) Taxable income and filing status
Rationale: Federal tax is calculated by applying tax bracket rates to "Taxable Income." The
specific brackets and standard deduction amounts used are determined by the taxpayer's
"Filing Status" (e.g., Single, Married Filing Jointly).
Question 10
For mortgages entered into after December 15, 2017, what is the maximum debt limit for
, 4
deducting interest on a principal and second home?
A) $500,000
B) $750,000
C) $1,000,000
D) $1,250,000
E) Unlimited
Correct Answer: B) $750,000
Rationale: The Tax Cuts and Jobs Act of 2017 lowered the limit for the mortgage interest
deduction from $1 million to $750,000 for new loans used to buy, build, or substantially
improve a home.
Question 11
How do tax credits differ from tax deductions?
A) Credits increase the amount of taxable income.
B) Credits reduce the amount of tax due directly.
C) Credits are only available to business owners.
D) Credits are subtracted from gross income.
E) Deductions are always more valuable than credits.
Correct Answer: B) Tax credits reduce the amount of tax due directly.
Rationale: A deduction reduces the amount of income subject to tax, whereas a credit is a
dollar-for-dollar reduction of the actual tax liability, making credits generally more
powerful than deductions of the same amount.
Question 12
Which tax form is provided to beneficiaries who receive income from trusts and estates?
A) Form 1040
B) Form 1065
C) Form 1041
D) Form 1120
E) Schedule C
Correct Answer: C) Form 1041
Rationale: Form 1041 (U.S. Income Tax Return for Estates and Trusts) is used to report
income, deductions, gains, and losses for estates and trusts. The beneficiaries receive their
specific portion of income details via Schedule K-1 from this form.
Question 13
Which of the following is calculated by taking earned and unearned income and subtracting
specific deductions?
A) Adjusted Gross Income
Verified Solution | Newest Update/Grade A+ Assured
Question 1
Which of the following is considered a "below the line" deduction?
A) Student loan interest
B) Educator expenses
C) Standard deduction
D) Health Savings Account (HSA) deduction
E) Self-employed health insurance deduction
Correct Answer: C) Standard deduction
Rationale: "Below the line" deductions are those taken after Adjusted Gross Income (AGI)
has been calculated. The standard deduction or itemized deductions are used to reduce AGI
to arrive at taxable income. Options A, B, D, and E are "above the line" deductions, also
known as Adjustments to Income.
Question 2
Eligible educators can deduct up to how much in qualified expenses paid during the tax year?
A) $100
B) $200
C) $250
D) $500
E) $1,000
Correct Answer: C) $250
Rationale: The educator expense deduction allows eligible K-12 teachers and other
educators to deduct up to $250 for unreimbursed costs for books, supplies, computer
equipment, and other supplementary materials used in the classroom.
Question 3
Which of the following medical expenses is ineligible for reimbursement from an HSA, Archer
MSA, or MA MSA?
A) Prescription drugs
B) Breast enhancement
C) Dental treatment
D) Vision care
E) Psychiatric care
Correct Answer: B) Breast enhancement
Rationale: Qualified medical expenses must be for the diagnosis, cure, mitigation,
treatment, or prevention of disease. Cosmetic surgery, such as breast enhancement, is
generally considered an ineligible expense unless it is necessary to improve a deformity
arising from a congenital abnormality, personal injury, or disfiguring disease.
, 2
Question 4
What is the tax rate for net capital gains if a Married Filing Jointly taxpayer has an income less
than $80,800?
A) 0%
B) 5%
C) 10%
D) 15%
E) 20%
Correct Answer: A) 0%
Rationale: For taxpayers who file as Married Filing Jointly and have taxable income below
the applicable threshold (such as $80,800 in the 2021/2022 tax era), the long-term capital
gains tax rate is 0%. This is designed to provide tax relief for lower-to-middle income
earners on investment growth.
Question 5
To claim a child as a dependent, they must meet the qualifying child test or the:
A) Support test
B) Relationship test
C) Qualifying relative test
D) Gross income test
E) Joint return test
Correct Answer: C) Qualifying relative test
Rationale: If an individual does not meet all the specific criteria to be a "qualifying child"
(such as age or residency requirements), they may still be claimed as a dependent if they
meet the "qualifying relative" test, which includes requirements for support, relationship,
and gross income.
Question 6
Ordinary dividends are generally taxed at what rate?
A) A flat 15% rate
B) The same rate as the ordinary income tax rate
C) The capital gains rate
D) 0% for all taxpayers
E) A flat 20% rate
Correct Answer: B) The same rate as the ordinary income tax rate
Rationale: While "qualified dividends" may be taxed at lower capital gains rates, "ordinary
dividends" are treated as standard income and taxed according to the taxpayer's specific
marginal income tax bracket.
, 3
Question 7
Distributions from an HSA, Archer MSA, or MA MSA are non-taxable when used for:
A) General living expenses
B) Qualified medical expenses of your dependent
C) Luxury spa treatments
D) Non-prescription vitamins
E) Over-the-counter supplements without a prescription
Correct Answer: B) Qualified medical expenses of your dependent
Rationale: Distributions from health-related savings accounts are tax-free if used for
qualified medical expenses for the account holder, their spouse, or their dependents. If used
for non-qualified expenses, the distribution is subject to income tax and potential penalties.
Question 8
Which residency status applies to an individual who is neither a U.S. citizen nor a resident alien
for tax purposes?
A) Resident alien
B) Dual-status alien
C) Non-resident alien
D) Permanent resident
E) Expatriate
Correct Answer: C) Non-resident alien
Rationale: A non-resident alien is an individual who has not passed the Green Card test or
the Substantial Presence test and is not a U.S. citizen. They are taxed only on income from
U.S. sources.
Question 9
What two pieces of information must a taxpayer know to accurately calculate their tax amount?
A) Gross income and age
B) Taxable income and filing status
C) Net income and state of residence
D) Total assets and number of dependents
E) Adjusted Gross Income and occupation
Correct Answer: B) Taxable income and filing status
Rationale: Federal tax is calculated by applying tax bracket rates to "Taxable Income." The
specific brackets and standard deduction amounts used are determined by the taxpayer's
"Filing Status" (e.g., Single, Married Filing Jointly).
Question 10
For mortgages entered into after December 15, 2017, what is the maximum debt limit for
, 4
deducting interest on a principal and second home?
A) $500,000
B) $750,000
C) $1,000,000
D) $1,250,000
E) Unlimited
Correct Answer: B) $750,000
Rationale: The Tax Cuts and Jobs Act of 2017 lowered the limit for the mortgage interest
deduction from $1 million to $750,000 for new loans used to buy, build, or substantially
improve a home.
Question 11
How do tax credits differ from tax deductions?
A) Credits increase the amount of taxable income.
B) Credits reduce the amount of tax due directly.
C) Credits are only available to business owners.
D) Credits are subtracted from gross income.
E) Deductions are always more valuable than credits.
Correct Answer: B) Tax credits reduce the amount of tax due directly.
Rationale: A deduction reduces the amount of income subject to tax, whereas a credit is a
dollar-for-dollar reduction of the actual tax liability, making credits generally more
powerful than deductions of the same amount.
Question 12
Which tax form is provided to beneficiaries who receive income from trusts and estates?
A) Form 1040
B) Form 1065
C) Form 1041
D) Form 1120
E) Schedule C
Correct Answer: C) Form 1041
Rationale: Form 1041 (U.S. Income Tax Return for Estates and Trusts) is used to report
income, deductions, gains, and losses for estates and trusts. The beneficiaries receive their
specific portion of income details via Schedule K-1 from this form.
Question 13
Which of the following is calculated by taking earned and unearned income and subtracting
specific deductions?
A) Adjusted Gross Income
