H&R Block Income Tax Course Assessment Exam
Prep- Individual Tax Practice Questions & Rationales
2026
This targeted tax preparation resource features original practice questions, verified
answers, and comprehensive logical rationales modeled directly after the H&R Block
Income Tax Course comprehensive assessment. It systematically covers core individual
tax preparation competencies, including qualifying dependent determinations, standard
and itemized deductions, filing status rules, and standard tax credits. Financial and tax
preparation students will master the underlying tax code, critical calculation sequences,
and professional compliance procedures to confidently pass their final exam and pursue
tax professional certification tracks.
1. The "kiddie tax" applies to which of the following individuals?
A. Any child under age 18 with earned income over $1,000
B. Children under age 19, or under age 24 if a full-time student, with unearned income
above an annual threshold
C. All dependents claimed on their parents' return
D. Only children under age 14 with investment income
Answer: B. Children under age 19, or under age 24 if a full-time student, with
unearned income above an annual threshold
Rationale: The kiddie tax applies to children under 19, or under 24 if a full-time student,
whose unearned income exceeds the annual threshold ($2,600 for 2024). Their unearned
income above that amount is taxed at the parents' marginal rate.
2. Which form is used to compute the kiddie tax?
A. Form 1040
B. Form 8615
C. Form 8814
D. Schedule D
Answer: B. Form 8615
,Rationale: Form 8615 (Tax for Certain Children Who Have Unearned Income) is used to
compute the kiddie tax. Form 8814 is used if the parent elects to report the child's interest
and dividends on their own return.
3. What is the maximum foreign earned income exclusion for 2024?
A. $100,000
B. $112,000
C. $126,500
D. $150,000
Answer: C. $126,500
Rationale: For 2024, the maximum foreign earned income exclusion is $126,500 per
qualifying individual.
4. Which form is used to claim the foreign earned income exclusion?
A. Form 2555
B. Form 1116
C. Form 8938
D. Form 1040
Answer: A. Form 2555
Rationale: Form 2555 (Foreign Earned Income) is used to claim the foreign earned income
exclusion and the foreign housing exclusion or deduction.
5. A taxpayer receives $5,000 from a hobby. How is this income reported?
A. On Schedule C as self-employment income
B. On Schedule E as rental income
,C. As other income on Schedule 1, not subject to self-employment tax
D. It is not taxable
Answer: C. As other income on Schedule 1, not subject to self-employment tax
Rationale: Hobby income is reported as other income on Schedule 1 (Form 1040). Expenses
are deductible only up to hobby income, and the income is not subject to self-employment
tax.
6. Bartering income must be reported at:
A. The cost of the goods or services provided
B. The fair market value of the goods or services received
C. Zero, because no cash changed hands
D. The value agreed upon by both parties only if over $600
Answer: B. The fair market value of the goods or services received
Rationale: Bartering income is taxable at the fair market value of the goods or services
received. It must be reported on the tax return.
7. Which form must an employee use to report tips of $20 or more in a month to
an employer?
A. Form W-2
B. Form 4070
C. Form 1099-MISC
D. Form 1040
Answer: B. Form 4070
Rationale: Employees who receive $20 or more in tips in any month must report the tips to
their employer on Form 4070 (Employee's Report of Tips to Employer).
, 8. What is the alimony recapture rule for divorce agreements executed before
2019?
A. Alimony is never recaptured
B. If alimony payments decrease by more than $15,000 in the first two years, part of the
excess may be recaptured
C. Recapture applies only if payments exceed $50,000 per year
D. Recapture applies only to child support
Answer: B. If alimony payments decrease by more than $15,000 in the first two
years, part of the excess may be recaptured
Rationale: For pre-2019 divorce agreements, alimony recapture rules apply if payments
decrease significantly in the first two years. The recaptured amount is included in the
payer's income and deducted by the recipient.
9. Which of the following is an exception to the 10% early withdrawal penalty on
IRA distributions?
A. First-time home purchase up to $10,000
B. Higher education expenses
C. Health insurance premiums while unemployed
D. All of the above
Answer: D. All of the above
Rationale: Exceptions to the 10% early withdrawal penalty include qualified first-time
homebuyer expenses up to $10,000, qualified higher education expenses, and health
insurance premiums while unemployed, among others.
10. When a taxpayer converts a traditional IRA to a Roth IRA, the conversion
amount is:
A. Not taxable
B. Taxable as ordinary income in the year of conversion
Prep- Individual Tax Practice Questions & Rationales
2026
This targeted tax preparation resource features original practice questions, verified
answers, and comprehensive logical rationales modeled directly after the H&R Block
Income Tax Course comprehensive assessment. It systematically covers core individual
tax preparation competencies, including qualifying dependent determinations, standard
and itemized deductions, filing status rules, and standard tax credits. Financial and tax
preparation students will master the underlying tax code, critical calculation sequences,
and professional compliance procedures to confidently pass their final exam and pursue
tax professional certification tracks.
1. The "kiddie tax" applies to which of the following individuals?
A. Any child under age 18 with earned income over $1,000
B. Children under age 19, or under age 24 if a full-time student, with unearned income
above an annual threshold
C. All dependents claimed on their parents' return
D. Only children under age 14 with investment income
Answer: B. Children under age 19, or under age 24 if a full-time student, with
unearned income above an annual threshold
Rationale: The kiddie tax applies to children under 19, or under 24 if a full-time student,
whose unearned income exceeds the annual threshold ($2,600 for 2024). Their unearned
income above that amount is taxed at the parents' marginal rate.
2. Which form is used to compute the kiddie tax?
A. Form 1040
B. Form 8615
C. Form 8814
D. Schedule D
Answer: B. Form 8615
,Rationale: Form 8615 (Tax for Certain Children Who Have Unearned Income) is used to
compute the kiddie tax. Form 8814 is used if the parent elects to report the child's interest
and dividends on their own return.
3. What is the maximum foreign earned income exclusion for 2024?
A. $100,000
B. $112,000
C. $126,500
D. $150,000
Answer: C. $126,500
Rationale: For 2024, the maximum foreign earned income exclusion is $126,500 per
qualifying individual.
4. Which form is used to claim the foreign earned income exclusion?
A. Form 2555
B. Form 1116
C. Form 8938
D. Form 1040
Answer: A. Form 2555
Rationale: Form 2555 (Foreign Earned Income) is used to claim the foreign earned income
exclusion and the foreign housing exclusion or deduction.
5. A taxpayer receives $5,000 from a hobby. How is this income reported?
A. On Schedule C as self-employment income
B. On Schedule E as rental income
,C. As other income on Schedule 1, not subject to self-employment tax
D. It is not taxable
Answer: C. As other income on Schedule 1, not subject to self-employment tax
Rationale: Hobby income is reported as other income on Schedule 1 (Form 1040). Expenses
are deductible only up to hobby income, and the income is not subject to self-employment
tax.
6. Bartering income must be reported at:
A. The cost of the goods or services provided
B. The fair market value of the goods or services received
C. Zero, because no cash changed hands
D. The value agreed upon by both parties only if over $600
Answer: B. The fair market value of the goods or services received
Rationale: Bartering income is taxable at the fair market value of the goods or services
received. It must be reported on the tax return.
7. Which form must an employee use to report tips of $20 or more in a month to
an employer?
A. Form W-2
B. Form 4070
C. Form 1099-MISC
D. Form 1040
Answer: B. Form 4070
Rationale: Employees who receive $20 or more in tips in any month must report the tips to
their employer on Form 4070 (Employee's Report of Tips to Employer).
, 8. What is the alimony recapture rule for divorce agreements executed before
2019?
A. Alimony is never recaptured
B. If alimony payments decrease by more than $15,000 in the first two years, part of the
excess may be recaptured
C. Recapture applies only if payments exceed $50,000 per year
D. Recapture applies only to child support
Answer: B. If alimony payments decrease by more than $15,000 in the first two
years, part of the excess may be recaptured
Rationale: For pre-2019 divorce agreements, alimony recapture rules apply if payments
decrease significantly in the first two years. The recaptured amount is included in the
payer's income and deducted by the recipient.
9. Which of the following is an exception to the 10% early withdrawal penalty on
IRA distributions?
A. First-time home purchase up to $10,000
B. Higher education expenses
C. Health insurance premiums while unemployed
D. All of the above
Answer: D. All of the above
Rationale: Exceptions to the 10% early withdrawal penalty include qualified first-time
homebuyer expenses up to $10,000, qualified higher education expenses, and health
insurance premiums while unemployed, among others.
10. When a taxpayer converts a traditional IRA to a Roth IRA, the conversion
amount is:
A. Not taxable
B. Taxable as ordinary income in the year of conversion
