New Tax Law/Recent Updates — Annual Federal Tax Refresher (AFTR) Practice Test
108 questions in this topic · 30 drawn at random this round
A taxpayer installs qualifying alternative fuel vehicle refueling property and places it in service on August 1, 2026. Based on OBBBA §70504, may the taxpayer claim the credit?
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)