Free CPA TCP (Tax Compliance & Planning) Tax Compliance and Planning for Individuals Practice Questions
Individual tax compliance and planning on the CPA TCP discipline exam covers complex individual tax situations, alternative minimum tax (AMT) calculations, investment income taxation, passive activity loss rules, and advanced tax planning strategies.
Sample Questions
Question 1
Easy
For 2026, what is the annual gift tax exclusion amount per donee?
Solution
C is correct.
For 2026, the annual gift tax exclusion is $19,000 per donee. This amount is indexed for inflation and increased from $18,000 (2024) to $19,000 (2025/2026). Gifts within this exclusion are not taxable and do not reduce the donor's lifetime exemption.
For 2026, the annual gift tax exclusion is $19,000 per donee. This amount is indexed for inflation and increased from $18,000 (2024) to $19,000 (2025/2026). Gifts within this exclusion are not taxable and do not reduce the donor's lifetime exemption.
Question 2
Medium
A married couple filing jointly in 2026 has three qualifying children ages 4, 9, and 16. Their AGI is $185,000. What is the total child tax credit available to the couple?
Solution
B is correct.
For 2026, the child tax credit is $2,200 per qualifying child under age 17. All three children (ages 4, 9, and 16) meet the age requirement. The phaseout for MFJ begins at $400,000 of AGI ($200,000 for other filers). Since the couple's AGI of $185,000 is well below the $400,000 threshold, no phaseout applies. Total credit = 3 x $2,200 = $6,600.
For 2026, the child tax credit is $2,200 per qualifying child under age 17. All three children (ages 4, 9, and 16) meet the age requirement. The phaseout for MFJ begins at $400,000 of AGI ($200,000 for other filers). Since the couple's AGI of $185,000 is well below the $400,000 threshold, no phaseout applies. Total credit = 3 x $2,200 = $6,600.
Question 3
Hard
A self-employed taxpayer earned net self-employment income of 160,000 in 2025. The taxpayer also earned 40,000 in wages. The Social Security wage base for 2025 is 176,100. What is the approximate total self-employment tax?
Solution
D is correct.
Self-employment tax is computed on 92.35% of net SE income: 160,000 times 0.9235 equals 147,760. The Social Security portion (12.4%) applies to combined wages and SE earnings up to the wage base (176,100). Since the taxpayer has 40,000 in wages, the remaining Social Security cap for SE income is 176,100 minus 40,000, which equals 136,100. The SE earnings subject to Social Security tax are the lesser of 147,760 or 136,100, so Social Security tax applies to 136,100. Social Security tax: 136,100 times 12.4% equals 16,876. Medicare tax (2.9%) applies to all SE earnings with no cap: 147,760 times 2.9% equals 4,285. Total SE tax: 16,876 plus 4,285 equals approximately 21,161. The 92.35% adjustment applies regardless of other income. Wages do reduce the available Social Security cap for SE income.
Self-employment tax is computed on 92.35% of net SE income: 160,000 times 0.9235 equals 147,760. The Social Security portion (12.4%) applies to combined wages and SE earnings up to the wage base (176,100). Since the taxpayer has 40,000 in wages, the remaining Social Security cap for SE income is 176,100 minus 40,000, which equals 136,100. The SE earnings subject to Social Security tax are the lesser of 147,760 or 136,100, so Social Security tax applies to 136,100. Social Security tax: 136,100 times 12.4% equals 16,876. Medicare tax (2.9%) applies to all SE earnings with no cap: 147,760 times 2.9% equals 4,285. Total SE tax: 16,876 plus 4,285 equals approximately 21,161. The 92.35% adjustment applies regardless of other income. Wages do reduce the available Social Security cap for SE income.