Registered Tax Return Preparer RTRP Practice Exam

Question: 1 / 400

Which item would be considered a tax deduction?

Investment profits

Home mortgage interest payments

Home mortgage interest payments qualify as a tax deduction because they are a form of interest expense that the IRS allows taxpayers to deduct from their taxable income. This deduction is available to homeowners who pay interest on loans secured by their primary or secondary residences. By deducting the mortgage interest from their income, taxpayers can potentially lower their taxable income, effectively reducing their overall tax burden.

To provide context for the other choices, investment profits are considered income rather than a deduction; they are taxed and reported as capital gains. Child support payments are not deductible by the payer nor taxable to the recipient, meaning they do not qualify as deductions on tax returns. Gambling winnings are treated as taxable income and must be reported; while losses can be deducted up to the amount of winnings, the winnings themselves do not qualify as deductible expenses.

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Child support payments

Gambling winnings

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