New Tax Law/Recent Updates — Annual Federal Tax Refresher (AFTR) Practice Test
108 questions in this topic · 30 drawn at random this round
A single taxpayer who claims the standard deduction gives $1,500 to a qualified charity in 2026. Based on OBBBA §70424, how much may the taxpayer deduct for this gift?
Session Progress
This Annual Federal Tax Refresher (AFTR) New Tax Law/Recent Updates practice set has 108 practice questions based on the official exam materials, each with an instant explanation. You need 70% on the real Annual Federal Tax Refresher (AFTR) knowledge test to pass.
Sample questions
Three questions from the New Tax Law/Recent Updates bank with the correct answer and an explanation. The practice quiz above draws 30 questions at random from the same bank.
For 2026, OBBBA §70201 created a new deduction for qualified tip income reported on Form 1040 Schedule 1-A. What is the maximum annual amount an eligible worker may deduct?
- Up to $25,000 of qualified tips — Correct answer
- Up to $12,500 of qualified tips
- Up to $6,000 of qualified tips
- Up to $40,400 of qualified tips
Explanation: OBBBA §70201 created a new deduction, claimed on Form 1040 Schedule 1-A, of up to $25,000 for qualified tip income for 2026. The $12,500 figure is the overtime-pay deduction (§70202), $6,000 is the enhanced senior deduction (§70103), and $40,400 is the SALT limit (§70120).
Handbook: New Tax Law — Deduction for Tip Income (OBBBA §70201, Form 1040 Schedule 1-A)
The new 2026 treatment of qualified tips under OBBBA §70201 is best described as:
- A deduction — the tips are still reported as income and then deducted, up to the statutory cap — Correct answer
- An exclusion — qualified tips are never reported on any tax form
- A refundable credit paid to the worker regardless of tax liability
- A permanent elimination of all payroll tax on tips
Explanation: OBBBA §70201 created a deduction (up to $25,000, on Form 1040 Schedule 1-A), not an exclusion. Qualified tips are still reported as income (for example on Form W-2 or Form 4137) and then deducted, subject to the cap and phaseouts. It is not a credit and does not eliminate tip reporting.
Handbook: New Tax Law — Deduction for Tip Income (OBBBA §70201)
For 2026, the new deductions for qualified tips and overtime pay are claimed on Form 1040, ______.
- Schedule 1-A, Additional Deductions — Correct answer
- Schedule C, Profit or Loss from Business
- Schedule B, Interest and Ordinary Dividends
- Schedule EIC, Earned Income Credit
Explanation: The outline (Pub 6079, 1.10) places the new tip deduction (§70201) and overtime-pay deduction (§70202) on Form 1040 Schedule 1-A, Additional Deductions (FS-2025-03). Schedule C reports business profit, Schedule B reports interest/dividends, and Schedule EIC supports the earned income credit.
Handbook: New Tax Law — Deduction for Tip Income (OBBBA §70201, Form 1040 Schedule 1-A)