University of Maryland
Examination I Workbook
Chapter 6 – Individual Deductions
Chapter 6 in a Nutshell
Deductions for AGI
Trade or business expenses
Rent and royalty expenses
Recognized losses on business assets
Health insurance deduction for self-employed individuals
Self-employment employer-portion payroll tax deductions
Interest on qualified education loans
Qualified education expenses
Deductions from AGI
Interest secured by mortgage on home
Miscellaneous itemized deductions subject to 2% floor
Employee business expenses
Tax preparation fees
Miscellaneous itemized deductions not
subject to 2% floor
Gambling losses (only to extent of gambling winnings)
Casualty and theft losses
Unrecovered cost of a life annuity
Basic standard deduction
Additional standard deduction for age and/or blindness
Sample Examination Questions
1. Which of the following is a true statement?
(A) All business expenses are deducted for AGI.
(B) Investment expenses are typically deducted for AGI.
(C) Tax preparation fees are deducted for AGI.
(D) Rental and royalty expenses are deducted for AGI.
(E) All of the above
Answer: D: investment expenses are typically deducted from AGI
2. Which of the following is a true statement?
(A) The deduction for interest on educational loans is subject to a phase-out limitation.
(B) The deduction for moving expenses is subject to a phase-out limitation.
(C) Self-employed taxpayers are allowed to deduct health care premiums even if the
taxpayer is eligible to participate in an employer-provided health plan.
(D) Taxpayers are not allowed to receive a moving allowance from their employers.
(E) All of the above are false.
Answer: A: Self-employed taxpayers are not allowed to deduct health care premiums if
they are eligible to participate in an employer-provided health plan.
3. This year Jong paid $3,000 of interest on a qualified education loan.
Jong files married
joint and reports modified AGI of $132,000.
What is Jong’s deduction for interest
expense on an educational loan?
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