Accredited Tax Preparer (ATP) Practice
Exam Questions And Correct Answers
(Verified Answers) Plus Rationales
2025|2026 Q&A | Instant Download Pdf
1. Which of the following is considered taxable income?
A. Life insurance proceeds received due to the death of a spouse
B. Gifts received from a friend
C. Wages from employment
D. Child support payments
C. Wages from employment
Rationale: Wages are considered taxable income under IRS rules. Life
insurance proceeds (death benefit), gifts, and child support are generally
non-taxable.
2. Which filing status is generally the most advantageous for a single
taxpayer with one dependent?
A. Single
,B. Head of Household
C. Married Filing Jointly
D. Qualifying Widow(er)
B. Head of Household
Rationale: Head of Household status provides a higher standard deduction
and more favorable tax rates compared to Single status for taxpayers with
dependents.
3. What is the maximum contribution limit to a Traditional IRA for a
taxpayer under 50 in 2025?
A. $5,500
B. $6,500
C. $7,000
D. $8,000
B. $6,500
Rationale: For 2025, the IRS limit for contributions to a Traditional IRA for
taxpayers under 50 is $6,500.
4. Which of the following is deductible as a business expense?
A. Personal groceries
B. Office supplies used in the business
C. Personal car repairs
D. Gym membership fees
B. Office supplies used in the business
,Rationale: Business-related expenses such as office supplies are deductible,
while personal expenses are not.
5. A taxpayer sold stock held for 18 months. The gain is classified as:
A. Short-term capital gain
B. Long-term capital gain
C. Ordinary income
D. Passive income
B. Long-term capital gain
Rationale: Assets held more than 12 months are classified as long-term for
capital gains purposes.
6. Which of the following is a refundable tax credit?
A. Child Tax Credit
B. American Opportunity Tax Credit
C. Lifetime Learning Credit
D. Earned Income Tax Credit
D. Earned Income Tax Credit
Rationale: The EITC is refundable, meaning it can generate a refund
exceeding tax liability.
7. Which of the following is NOT included in gross income?
A. Wages
B. Alimony received (for divorces finalized in 2021 or later)
C. Interest income
D. Social Security benefits (may be partially taxable)
, B. Alimony received (for divorces finalized in 2021 or later)
Rationale: For divorces finalized in 2019 or earlier, alimony is taxable; after
2018 divorces, alimony is not included in gross income.
8. A taxpayer can deduct medical expenses only to the extent that they
exceed what percentage of AGI?
A. 5%
B. 7.5%
C. 10%
D. 15%
B. 7.5%
Rationale: The IRS allows taxpayers to deduct qualified medical expenses
that exceed 7.5% of their AGI.
9. Which of the following retirement accounts allows tax-free withdrawals
in retirement if rules are met?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA
C. Roth IRA
Rationale: Contributions to a Roth IRA are made with after-tax dollars, and
qualified withdrawals are tax-free.
10. Which form does an employee use to report withholding allowances to
their employer?
Exam Questions And Correct Answers
(Verified Answers) Plus Rationales
2025|2026 Q&A | Instant Download Pdf
1. Which of the following is considered taxable income?
A. Life insurance proceeds received due to the death of a spouse
B. Gifts received from a friend
C. Wages from employment
D. Child support payments
C. Wages from employment
Rationale: Wages are considered taxable income under IRS rules. Life
insurance proceeds (death benefit), gifts, and child support are generally
non-taxable.
2. Which filing status is generally the most advantageous for a single
taxpayer with one dependent?
A. Single
,B. Head of Household
C. Married Filing Jointly
D. Qualifying Widow(er)
B. Head of Household
Rationale: Head of Household status provides a higher standard deduction
and more favorable tax rates compared to Single status for taxpayers with
dependents.
3. What is the maximum contribution limit to a Traditional IRA for a
taxpayer under 50 in 2025?
A. $5,500
B. $6,500
C. $7,000
D. $8,000
B. $6,500
Rationale: For 2025, the IRS limit for contributions to a Traditional IRA for
taxpayers under 50 is $6,500.
4. Which of the following is deductible as a business expense?
A. Personal groceries
B. Office supplies used in the business
C. Personal car repairs
D. Gym membership fees
B. Office supplies used in the business
,Rationale: Business-related expenses such as office supplies are deductible,
while personal expenses are not.
5. A taxpayer sold stock held for 18 months. The gain is classified as:
A. Short-term capital gain
B. Long-term capital gain
C. Ordinary income
D. Passive income
B. Long-term capital gain
Rationale: Assets held more than 12 months are classified as long-term for
capital gains purposes.
6. Which of the following is a refundable tax credit?
A. Child Tax Credit
B. American Opportunity Tax Credit
C. Lifetime Learning Credit
D. Earned Income Tax Credit
D. Earned Income Tax Credit
Rationale: The EITC is refundable, meaning it can generate a refund
exceeding tax liability.
7. Which of the following is NOT included in gross income?
A. Wages
B. Alimony received (for divorces finalized in 2021 or later)
C. Interest income
D. Social Security benefits (may be partially taxable)
, B. Alimony received (for divorces finalized in 2021 or later)
Rationale: For divorces finalized in 2019 or earlier, alimony is taxable; after
2018 divorces, alimony is not included in gross income.
8. A taxpayer can deduct medical expenses only to the extent that they
exceed what percentage of AGI?
A. 5%
B. 7.5%
C. 10%
D. 15%
B. 7.5%
Rationale: The IRS allows taxpayers to deduct qualified medical expenses
that exceed 7.5% of their AGI.
9. Which of the following retirement accounts allows tax-free withdrawals
in retirement if rules are met?
A. Traditional IRA
B. 401(k)
C. Roth IRA
D. SEP IRA
C. Roth IRA
Rationale: Contributions to a Roth IRA are made with after-tax dollars, and
qualified withdrawals are tax-free.
10. Which form does an employee use to report withholding allowances to
their employer?
