FPQP Exam (Module 8 Tax Implications
of Financial Decisions) Questions and
All Complete Answers 2026/2027 Update.
Which of the following taxes is NOT allowed as an itemized deduction?
A) Property taxes
B) Local income taxes
C) State income taxes
D) FICA taxes - Answer D) FICA taxes
Explanation
FICA (Social Security) taxes are not allowed as an itemized deduction. The maximum deduction
for all state and local taxes, including property taxes, is $10,000 per year.
Which of the following circumstances would require most taxpayers to file a federal income tax
return?
A) The taxpayer elects to become an expatriate.
B) The taxpayer's gross income exceeds the standard deduction.
C) The taxpayer earned any amount of unearned income.
D) The taxpayer has dependent children. - Answer B) The taxpayer's gross income exceeds the
standard deduction.
Explanation
A taxpayer is generally required to file a federal income tax return if the taxpayer's gross income
exceeds the standard deduction amount. The other choices listed do not necessarily affect
impact filing requirements.
Which of the following is NOT a filing status for federal income tax purposes?
A) Qualified disabled
B) Married filing jointly
C) Married filing separately
D) Single - Answer A) Qualified disabled
Explanation
Qualified disabled is not a recognized filing status.
What is the significance of a taxpayer supporting a minor child as a dependent for federal
income tax purposes?
A) The taxpayer receives a larger standard deduction.
, B) The taxpayer receives an additional standard deduction.
C) The taxpayer cannot use the Single (S) status.
D) The taxpayer may claim a tax credit for each dependent child under the age of 17. - Answer
D) The taxpayer may claim a tax credit for each dependent child under the age of 17.
Explanation
A taxpayer is allowed to claim as a tax credit each person who is a dependent, but does not
automatically receive a larger or additional standard deduction for each dependent. Taxpayers
with children often use the Married Filing Jointly or Head of Household filing status. However, in
the case of a divorced parent who does not have custody or does not provide more than 50% of
the minor's support, the Single (S) filing status may still be required.
Gross income includes all of the following types of income except
A) dividends received.
B) tips.
C) child support received.
D) taxable interest. - Answer C) child support received.
Explanation
Gross income does not include child support received. Child support received is an exclusion.
Which of these would be included in calculating a client's gross income?
A) Lottery prize money
B) Inheritances received
C) Life insurance proceeds received upon the insured's death
D) Child support received - Answer A) Lottery prize money
Explanation
Money from lottery prize winnings is taxable and would be included in a taxpayer's gross
income. The other options listed are generally excluded from a taxpayer's gross income.
Which of these is an above-the-line deduction?
A) Medical expenses
B) Deductible IRA contributions
C) State taxes paid by the individual
D) Gifts to charities - Answer B) Deductible IRA contributions
Explanation
Deductible IRA contributions are one of the above-the-line deductions, which generally are
subracted from gross income to arrive at adjusted gross income The other options listed are
itemized, or below-the-line deductions.
of Financial Decisions) Questions and
All Complete Answers 2026/2027 Update.
Which of the following taxes is NOT allowed as an itemized deduction?
A) Property taxes
B) Local income taxes
C) State income taxes
D) FICA taxes - Answer D) FICA taxes
Explanation
FICA (Social Security) taxes are not allowed as an itemized deduction. The maximum deduction
for all state and local taxes, including property taxes, is $10,000 per year.
Which of the following circumstances would require most taxpayers to file a federal income tax
return?
A) The taxpayer elects to become an expatriate.
B) The taxpayer's gross income exceeds the standard deduction.
C) The taxpayer earned any amount of unearned income.
D) The taxpayer has dependent children. - Answer B) The taxpayer's gross income exceeds the
standard deduction.
Explanation
A taxpayer is generally required to file a federal income tax return if the taxpayer's gross income
exceeds the standard deduction amount. The other choices listed do not necessarily affect
impact filing requirements.
Which of the following is NOT a filing status for federal income tax purposes?
A) Qualified disabled
B) Married filing jointly
C) Married filing separately
D) Single - Answer A) Qualified disabled
Explanation
Qualified disabled is not a recognized filing status.
What is the significance of a taxpayer supporting a minor child as a dependent for federal
income tax purposes?
A) The taxpayer receives a larger standard deduction.
, B) The taxpayer receives an additional standard deduction.
C) The taxpayer cannot use the Single (S) status.
D) The taxpayer may claim a tax credit for each dependent child under the age of 17. - Answer
D) The taxpayer may claim a tax credit for each dependent child under the age of 17.
Explanation
A taxpayer is allowed to claim as a tax credit each person who is a dependent, but does not
automatically receive a larger or additional standard deduction for each dependent. Taxpayers
with children often use the Married Filing Jointly or Head of Household filing status. However, in
the case of a divorced parent who does not have custody or does not provide more than 50% of
the minor's support, the Single (S) filing status may still be required.
Gross income includes all of the following types of income except
A) dividends received.
B) tips.
C) child support received.
D) taxable interest. - Answer C) child support received.
Explanation
Gross income does not include child support received. Child support received is an exclusion.
Which of these would be included in calculating a client's gross income?
A) Lottery prize money
B) Inheritances received
C) Life insurance proceeds received upon the insured's death
D) Child support received - Answer A) Lottery prize money
Explanation
Money from lottery prize winnings is taxable and would be included in a taxpayer's gross
income. The other options listed are generally excluded from a taxpayer's gross income.
Which of these is an above-the-line deduction?
A) Medical expenses
B) Deductible IRA contributions
C) State taxes paid by the individual
D) Gifts to charities - Answer B) Deductible IRA contributions
Explanation
Deductible IRA contributions are one of the above-the-line deductions, which generally are
subracted from gross income to arrive at adjusted gross income The other options listed are
itemized, or below-the-line deductions.
