HR Block Exam 2026 Question and Answer |
Updated Review from Previously Tested
Questions | Grade A+
• Standard Deduction -✓✓Set by statute. Included in calculating the Below-the-Line
deductions (for Taxable Income). Alternative is Itemized Deduction
• Itemized Deduction -✓✓Sum of allowable deductions in calculating the Below-the-Line
deductions (for Taxable Income). Alternative is Standard Deduction
• Tax Rate (Individuals) - Ordinary Income -✓✓10% - 37%
• Tax Rate (Individuals) - Net Gains / Qualified Dividends -✓✓0% - 20% (sometimes)
20% - 28% (usually)
• Alternative Minimum Tax Rate -✓✓26% - 28%
• Capital Gains -✓✓Profit (or Loss) from the sale of property or investments (preferential
tax rate compared to Ordinary Income)
• Adjusted Gross Income (AGI) -✓✓Gross Income - Deductions
• Taxable Income -✓✓AGI - (Larger of Standard or Itemized Deduction)
• Tentative Tax -✓✓Taxable Income (x) Tax Rate
• Taxes Due (+) or Refund (-) -✓✓Tentative Tax - Credits
• Refundable Tax Credit -✓✓Taxpayer can receive money through a refund
• Nonrefundable Tax Credit -✓✓Tax is lowered to a possible $0. But no refund.
• Title 26 (US. Code) -✓✓The statutory bas of all federal tax law.
• Gross Income -✓✓"All income from whatever source derived"
• Haig-Simons Definition of Income -✓✓Market Value of Rights Exercised in
Consumption + Change in Property Rights over the Term.
Interpretation: Total value of consumer expenditures + net change in savings (e.g., bank
accounts, stocks and bonds, real estate)
, Alternative is Economic Benefit Definition.
• Economic Benefit Definition of Income -✓✓Value of any economic benefit received by
the taxpayer regardless of the form of that benefit.
Alternative is Haig-Simons Definition.
• Imputed Income -✓✓*Not Income
Any services one performs for oneself or family / the value of property used that one
owns
• Loans -✓✓Loans themselves are not taxed.
However, Loan Discharge or Loan Forgiveness may constitute Income.
- Debt must be enforceable.
- Creditor has agreed to receive less than initially contracted
• Compensation Income -✓✓Consideration for Performance of Services (regardless of
the form - e.g., cash, property, fringe benefits).
Ordinary Income taxable up to the highest rate.
• Business Income -✓✓A SOLE PROPRIETOR should report his gross income -
deductions.
• Annuities -✓✓Annuities (in business) involve a company promising to pay an amount
of money monthly to a person in exchange for the person paying premiums to the
issuer.
Annuity payments include partial repayment of initial investment (excludable).
1) Payment (*) [Investment / Total Expected Return] = Excludable Amount
2) Payment - Excludable Amount = Taxable Income
• Prizes and Awards -✓✓Include unless:
- Qualified Scholarship
- Employee Achievement Award
- Recognition of Religious, Charitable, Scientific, Literary, Artistic, Educational, or Civic
Achievement
Criteria for Exclusion:
- Recipient did nothing to be chosen
- Recipient owes no future services
- Recipient donates it all to charity immediately.
Updated Review from Previously Tested
Questions | Grade A+
• Standard Deduction -✓✓Set by statute. Included in calculating the Below-the-Line
deductions (for Taxable Income). Alternative is Itemized Deduction
• Itemized Deduction -✓✓Sum of allowable deductions in calculating the Below-the-Line
deductions (for Taxable Income). Alternative is Standard Deduction
• Tax Rate (Individuals) - Ordinary Income -✓✓10% - 37%
• Tax Rate (Individuals) - Net Gains / Qualified Dividends -✓✓0% - 20% (sometimes)
20% - 28% (usually)
• Alternative Minimum Tax Rate -✓✓26% - 28%
• Capital Gains -✓✓Profit (or Loss) from the sale of property or investments (preferential
tax rate compared to Ordinary Income)
• Adjusted Gross Income (AGI) -✓✓Gross Income - Deductions
• Taxable Income -✓✓AGI - (Larger of Standard or Itemized Deduction)
• Tentative Tax -✓✓Taxable Income (x) Tax Rate
• Taxes Due (+) or Refund (-) -✓✓Tentative Tax - Credits
• Refundable Tax Credit -✓✓Taxpayer can receive money through a refund
• Nonrefundable Tax Credit -✓✓Tax is lowered to a possible $0. But no refund.
• Title 26 (US. Code) -✓✓The statutory bas of all federal tax law.
• Gross Income -✓✓"All income from whatever source derived"
• Haig-Simons Definition of Income -✓✓Market Value of Rights Exercised in
Consumption + Change in Property Rights over the Term.
Interpretation: Total value of consumer expenditures + net change in savings (e.g., bank
accounts, stocks and bonds, real estate)
, Alternative is Economic Benefit Definition.
• Economic Benefit Definition of Income -✓✓Value of any economic benefit received by
the taxpayer regardless of the form of that benefit.
Alternative is Haig-Simons Definition.
• Imputed Income -✓✓*Not Income
Any services one performs for oneself or family / the value of property used that one
owns
• Loans -✓✓Loans themselves are not taxed.
However, Loan Discharge or Loan Forgiveness may constitute Income.
- Debt must be enforceable.
- Creditor has agreed to receive less than initially contracted
• Compensation Income -✓✓Consideration for Performance of Services (regardless of
the form - e.g., cash, property, fringe benefits).
Ordinary Income taxable up to the highest rate.
• Business Income -✓✓A SOLE PROPRIETOR should report his gross income -
deductions.
• Annuities -✓✓Annuities (in business) involve a company promising to pay an amount
of money monthly to a person in exchange for the person paying premiums to the
issuer.
Annuity payments include partial repayment of initial investment (excludable).
1) Payment (*) [Investment / Total Expected Return] = Excludable Amount
2) Payment - Excludable Amount = Taxable Income
• Prizes and Awards -✓✓Include unless:
- Qualified Scholarship
- Employee Achievement Award
- Recognition of Religious, Charitable, Scientific, Literary, Artistic, Educational, or Civic
Achievement
Criteria for Exclusion:
- Recipient did nothing to be chosen
- Recipient owes no future services
- Recipient donates it all to charity immediately.
