CPA REG Individual Deductions & Loss Limits Practice Questions
Individual Deductions & Loss Limits makes up 5 of every 50 questions on a Tigertest CPA REG practice test. Here are 10 of the 20 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on the AICPA's 2026 REG blueprint. Original multiple-choice questions; 50 per test, weighted like the real section's five areas, 75% target. Not affiliated with the AICPA or NASBA.
1. Which item is a deduction for AGI rather than an itemized deduction?
- A.Unreimbursed medical costs
- B.Half of self-employment tax
- C.Home mortgage interest
- D.State income taxes
Answer: B. The deductible half of self-employment tax is an adjustment to income. Mortgage interest, state taxes and medical costs are itemized deductions.
2. A self-employed individual with no employer plan available pays her own health insurance premiums. They are deductible:
- A.Not at all
- B.Only above 7.5% of AGI
- C.Only as itemized medical
- D.For AGI, up to SE earnings
Answer: D. Self-employed health insurance is an adjustment to income, limited to the net earnings from the business, when no subsidized employer plan is available.
3. An eligible individual's own contributions to a health savings account, within the limit, are:
- A.Deductible for AGI
- B.A refundable credit
- C.Deductible only if itemizing
- D.Never deductible
Answer: A. Contributions an eligible individual makes to an HSA are an above-the-line deduction, available whether or not the taxpayer itemizes.
4. A taxpayer with AGI of $60,000 has $7,000 of unreimbursed medical expenses and itemizes. The medical deduction is:
- A.$1,000
- B.$4,500
- C.$2,500
- D.$7,000
Answer: C. Medical expenses are deductible above 7.5% of AGI: $7,000 - (7.5% x $60,000 = $4,500) = $2,500.
5. Which cost qualifies as a deductible medical expense?
- A.Gym membership dues
- B.Cosmetic teeth whitening
- C.Prescription drugs
- D.Over-the-counter vitamins
Answer: C. Prescribed drugs and insulin qualify. General health items, gym dues and cosmetic procedures do not.
6. Which tax can an individual deduct as an itemized deduction?
- A.Real estate tax on a home
- B.Employee FICA tax
- C.Federal gift tax paid
- D.Federal income tax
Answer: A. State and local real property taxes are deductible taxes, subject to the SALT limit. Federal income, FICA and gift taxes are never deductible.
7. Interest on a home equity loan whose proceeds paid off credit card debt is:
- A.Deductible for AGI
- B.Fully deductible
- C.Deductible up to 50%
- D.Not deductible
Answer: D. Home equity interest is deductible only when the loan is used to buy, build or substantially improve the home. Paying off credit cards makes it personal interest.
8. A personal casualty loss from a declared disaster is reduced by $100 per event. The total is then deductible only to the extent it exceeds what share of AGI?
- A.50%
- B.10%
- C.7.5%
- D.2%
Answer: B. Personal casualty losses are deductible only when they come from a declared disaster (other losses offset only personal casualty gains). They are reduced by $100 per event and then by 10% of AGI; special qualified disaster relief can replace these floors. The 7.5% floor is for medical expenses.
9. The qualified business income deduction is generally 20% of QBI, limited to 20% of the taxpayer's:
- A.Gross receipts of the business
- B.Taxable income less net capital gain
- C.Adjusted gross income less losses
- D.W-2 wages paid by the business
Answer: B. The overall cap is 20% of taxable income before the QBI deduction, reduced by net capital gain. W-2 wages matter only for the separate wage limit above the threshold.
10. Which item is excluded from qualified business income?
- A.S corporation ordinary income
- B.A rental business's net income
- C.Sole proprietor's net profit
- D.Guaranteed payments to a partner
Answer: D. QBI excludes guaranteed payments, reasonable compensation, capital gains and most investment income. Ordinary business income from a qualified trade or business counts.
Practice all 20 individual deductions & loss limits questions, and the rest of the 200-question bank, in the free CPA REG training sets. Questions you miss come back until you have mastered them.
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