H&R BLOCK INCOME TAX COURSE EXAM
QUESTIONS AND 100% VERIFIED
ANSWERS WITH RATIONALES GRADED A+
LATEST
Question 1
Which of the following is considered taxable income under federal tax law?
A. Child support received
B. Gifts received from family members
C. Wages earned from employment
D. Life insurance proceeds from a policy paid out due to death
Answer: C. Wages earned from employment
Rationale: Wages, salaries, and tips are considered taxable income. Child support,
gifts, and life insurance death benefits are generally not taxable to the recipient.
Question 2
A taxpayer contributes $3,000 to a traditional IRA. If they meet the requirements,
this contribution:
A. Is fully taxable
B. Is deductible from gross income
C. Must be reported as taxable income
D. Can only be deducted on Schedule C
Answer: B. Is deductible from gross income
Rationale: Contributions to a traditional IRA may be deductible, reducing taxable
income, provided the taxpayer meets IRS eligibility rules.
,Question 3
Which filing status provides the lowest tax rates for a single taxpayer supporting a
dependent?
A. Single
B. Head of Household
C. Married Filing Separately
D. Qualifying Widow(er)
Answer: B. Head of Household
Rationale: Head of Household status provides more favorable tax brackets than
Single and is available to single taxpayers supporting qualifying dependents.
Question 4
A taxpayer received $2,500 in unemployment compensation. How is this income
reported?
A. On Schedule C
B. On Form 1099-G and reported as taxable income
C. Not reported; unemployment compensation is not taxable
D. Only reported if it exceeds $5,000
Answer: B. On Form 1099-G and reported as taxable income
Rationale: Unemployment compensation is taxable and reported by the payer on
Form 1099-G.
Question 5
Which of the following expenses cannot be deducted as an itemized deduction?
A. Mortgage interest on a primary residence
B. State income taxes paid
C. Personal clothing expenses
D. Charitable contributions
,Answer: C. Personal clothing expenses
Rationale: Personal clothing is considered a personal expense and is not
deductible, unlike mortgage interest, state taxes, and charitable contributions.
Question 6
John is single and earned $50,000 in wages. He has $5,000 in student loan interest,
$3,000 in traditional IRA contributions, and paid $2,000 in state taxes. Which of
the following is correct regarding his adjustments to income?
A. Only the IRA contribution is an adjustment
B. Student loan interest and IRA contributions are adjustments to income
C. State taxes are an adjustment to income
D. None of these are adjustments
Answer: B. Student loan interest and IRA contributions are adjustments to income
Rationale: Student loan interest and IRA contributions are deductions for AGI
(adjustments to income). State taxes are itemized deductions, not adjustments to
income.
Question 7
Which tax form is used by employees to report income and withholding from
wages?
A. Form 1040
B. Form W-2
C. Form 1099-MISC
D. Form 941
Answer: B. Form W-2
Rationale: Employers provide Form W-2 to employees showing total wages
earned and taxes withheld for the year. Form 1040 is the individual tax return;
1099-MISC reports miscellaneous income; 941 is for employer quarterly filings.
, Question 8
Mary sold stock she purchased for $4,000 for $6,500. She also sold stock
purchased for $3,000 for $2,500. What is her net capital gain or loss?
A. $500 gain
B. $500 loss
C. $1,000 gain
D. $1,000 loss
Answer: A. $500 gain
Rationale: The first sale resulted in a $2,500 gain ($6,500 – $4,000), the second
sale a $500 loss ($2,500 – $3,000). Net capital gain = $2,500 – $2,000 = $500.
Question 9
A dependent child can earn up to what amount in unearned income before the
"kiddie tax" applies (2026)?
A. $1,250
B. $2,500
C. $3,600
D. $4,400
Answer: B. $2,500
Rationale: For 2026, the first $2,500 of unearned income (interest, dividends) is
generally taxed at the child’s rate, above that, the kiddie tax rules apply.
QUESTIONS AND 100% VERIFIED
ANSWERS WITH RATIONALES GRADED A+
LATEST
Question 1
Which of the following is considered taxable income under federal tax law?
A. Child support received
B. Gifts received from family members
C. Wages earned from employment
D. Life insurance proceeds from a policy paid out due to death
Answer: C. Wages earned from employment
Rationale: Wages, salaries, and tips are considered taxable income. Child support,
gifts, and life insurance death benefits are generally not taxable to the recipient.
Question 2
A taxpayer contributes $3,000 to a traditional IRA. If they meet the requirements,
this contribution:
A. Is fully taxable
B. Is deductible from gross income
C. Must be reported as taxable income
D. Can only be deducted on Schedule C
Answer: B. Is deductible from gross income
Rationale: Contributions to a traditional IRA may be deductible, reducing taxable
income, provided the taxpayer meets IRS eligibility rules.
,Question 3
Which filing status provides the lowest tax rates for a single taxpayer supporting a
dependent?
A. Single
B. Head of Household
C. Married Filing Separately
D. Qualifying Widow(er)
Answer: B. Head of Household
Rationale: Head of Household status provides more favorable tax brackets than
Single and is available to single taxpayers supporting qualifying dependents.
Question 4
A taxpayer received $2,500 in unemployment compensation. How is this income
reported?
A. On Schedule C
B. On Form 1099-G and reported as taxable income
C. Not reported; unemployment compensation is not taxable
D. Only reported if it exceeds $5,000
Answer: B. On Form 1099-G and reported as taxable income
Rationale: Unemployment compensation is taxable and reported by the payer on
Form 1099-G.
Question 5
Which of the following expenses cannot be deducted as an itemized deduction?
A. Mortgage interest on a primary residence
B. State income taxes paid
C. Personal clothing expenses
D. Charitable contributions
,Answer: C. Personal clothing expenses
Rationale: Personal clothing is considered a personal expense and is not
deductible, unlike mortgage interest, state taxes, and charitable contributions.
Question 6
John is single and earned $50,000 in wages. He has $5,000 in student loan interest,
$3,000 in traditional IRA contributions, and paid $2,000 in state taxes. Which of
the following is correct regarding his adjustments to income?
A. Only the IRA contribution is an adjustment
B. Student loan interest and IRA contributions are adjustments to income
C. State taxes are an adjustment to income
D. None of these are adjustments
Answer: B. Student loan interest and IRA contributions are adjustments to income
Rationale: Student loan interest and IRA contributions are deductions for AGI
(adjustments to income). State taxes are itemized deductions, not adjustments to
income.
Question 7
Which tax form is used by employees to report income and withholding from
wages?
A. Form 1040
B. Form W-2
C. Form 1099-MISC
D. Form 941
Answer: B. Form W-2
Rationale: Employers provide Form W-2 to employees showing total wages
earned and taxes withheld for the year. Form 1040 is the individual tax return;
1099-MISC reports miscellaneous income; 941 is for employer quarterly filings.
, Question 8
Mary sold stock she purchased for $4,000 for $6,500. She also sold stock
purchased for $3,000 for $2,500. What is her net capital gain or loss?
A. $500 gain
B. $500 loss
C. $1,000 gain
D. $1,000 loss
Answer: A. $500 gain
Rationale: The first sale resulted in a $2,500 gain ($6,500 – $4,000), the second
sale a $500 loss ($2,500 – $3,000). Net capital gain = $2,500 – $2,000 = $500.
Question 9
A dependent child can earn up to what amount in unearned income before the
"kiddie tax" applies (2026)?
A. $1,250
B. $2,500
C. $3,600
D. $4,400
Answer: B. $2,500
Rationale: For 2026, the first $2,500 of unearned income (interest, dividends) is
generally taxed at the child’s rate, above that, the kiddie tax rules apply.
