FHCE 3200 FINAL EXAM 2026 ACTUAL QUESTIONS AND
SOLUTIONS RATED A+
✔✔form 1040A - ✔✔-a more complicated form than form 1040EZ
--allows other types of income reported (such as tips, interest, dividends, and
scholarships)
--allows the taxpayer to claim more deductions and tax credits
✔✔form 1040 - ✔✔-the standard tax form everyone can use
-used by the highest-earning households
-also used by households with modest incomes
✔✔support - ✔✔the child did not provide more than half of his or her own support
during the tax year
✔✔age - ✔✔at the end of the tax year, the child is:
-younger than 19 and younger than the taxpayer
OR
-a full-time student, younger than 24, and younger than the taxpayer
✔✔relationship - ✔✔-taxpayer's child, adopted child, stepchild, foster child, or his or
descendent
OR
-taxpayer's sibling, half-sibling, step-sibling, or descendent of any of them
✔✔abode - ✔✔the child must live with the taxpayer for more than half the year,
excluding temporary absences such as schooling, vacations, and illness
✔✔gross income - ✔✔the sum of all your income
✔✔adjusted gross income (agi) - ✔✔amount calculated after the for agi deductions
(expenses allowed by congress to offset gross income)
✔✔taxable income - ✔✔the amount remaining to be taxed after the from agi deductions
(standard or itemized)
✔✔standard deduction - ✔✔an amount set by congress
✔✔itemized deductions - ✔✔specific expenditures that taxpayers can claim instead of
the standard deduction
✔✔effective tax rate (average tax rate) - ✔✔measures the average tax an individual
pays on his or her entire income
,✔✔effective tax rate - ✔✔total federal taxes / taxpayer's total income =
✔✔capital gain income - ✔✔produced by owning capital assets
--things you own for investment or personal use
---stocks
---mutual funds
---coin collections
---other investments
---personal belongings
---car
---real estate
✔✔tax credit - ✔✔a dollar-for-dollar reduction in an assessed tax liability
✔✔negative effective tax rates - ✔✔-result when refundable tax credits exceed an
individual's total tax
--most common among low-income working households with dependent children and
college students
--bottom 20% of all households had an average effective federal tax rate of -9.2%
--next 20% of all households had an average effective income tax rate of -2.3%
✔✔refundable tax credits - ✔✔can reduce an individual's assessed tax below zero
✔✔nonrefundable tax credits - ✔✔can reduce an individual's assessed tax to zero bu
cannot make it negative
✔✔education tax credits - ✔✔-american opportunity credit
-lifetime learning credit
✔✔American opportunity credit - ✔✔partly refundable tax credit available to those who
claim a student as a dependent on their tax return
✔✔lifetime learning credit - ✔✔available to those who do not qualify for the american
opportunity credit
✔✔child-based tax credits - ✔✔-earned income credit
-child tax credit
✔✔earned income credit - ✔✔a refundable credit designed to reward work and boost
the earnings of low-income workers
✔✔child tax credit - ✔✔a maximum nonrefundable credit per qualifying child ($7,000 in
tax year 2018)
, ✔✔health insurance tax credits - ✔✔-advanced premium tax credit
-premium tax credit
✔✔advanced premium tax credit - ✔✔lowers the costs of monthly premiums of these
insurance plans
✔✔premium tax credit - ✔✔a refundable credit for those who do not have employer
health insurance and buy via state or federal health insurance exchanges
✔✔retirement savings credit - ✔✔retirement savings contribution credit
✔✔retirement savings contribution credit - ✔✔-congress lowers your taxes if you save
for the future through this
-a nonrefundable tax credit of up to $1,000 if you have:
--income below a certain amount and contribute to an IRA
--voluntary contributions to an employer-sponsored retirement plan
✔✔employee - ✔✔-your paycheck shows withholdings for FICA (payroll taxes)
-receives a W-2 statement
✔✔self-employed - ✔✔-there will be no FICA withheld
-receives 1099 statement at the end of the year
✔✔self-employment taxes - ✔✔-pay estimated tax payments quarterly:
--due 15 days after the end of each calendar quarter
✔✔self-employment tax - ✔✔-employee's share a FICA, plus employer's share of FICA
(15.3%) paid by self-employed individual
-if income is greater than $400, but less than $128,400
-for income greater than $128,400, the tax rate is 2.9%
✔✔7.65% - ✔✔the total Social Security tax rate is half of which is paid by the employer
and half by the employee (or all paid by the self-employed individual)
✔✔realized income - ✔✔when you convert one asset into a different one for a gain such
as: converting your human capital into a paycheck; selling your home that has
increased in value
✔✔recognized income - ✔✔when realized income is reported and taxed, which might
exclude: scholarships for tuition fees - scholarship income for tuition is exempt from
taxes
✔✔education-related expenses - ✔✔-tuition and fees paid
-book and course supply expenses
SOLUTIONS RATED A+
✔✔form 1040A - ✔✔-a more complicated form than form 1040EZ
--allows other types of income reported (such as tips, interest, dividends, and
scholarships)
--allows the taxpayer to claim more deductions and tax credits
✔✔form 1040 - ✔✔-the standard tax form everyone can use
-used by the highest-earning households
-also used by households with modest incomes
✔✔support - ✔✔the child did not provide more than half of his or her own support
during the tax year
✔✔age - ✔✔at the end of the tax year, the child is:
-younger than 19 and younger than the taxpayer
OR
-a full-time student, younger than 24, and younger than the taxpayer
✔✔relationship - ✔✔-taxpayer's child, adopted child, stepchild, foster child, or his or
descendent
OR
-taxpayer's sibling, half-sibling, step-sibling, or descendent of any of them
✔✔abode - ✔✔the child must live with the taxpayer for more than half the year,
excluding temporary absences such as schooling, vacations, and illness
✔✔gross income - ✔✔the sum of all your income
✔✔adjusted gross income (agi) - ✔✔amount calculated after the for agi deductions
(expenses allowed by congress to offset gross income)
✔✔taxable income - ✔✔the amount remaining to be taxed after the from agi deductions
(standard or itemized)
✔✔standard deduction - ✔✔an amount set by congress
✔✔itemized deductions - ✔✔specific expenditures that taxpayers can claim instead of
the standard deduction
✔✔effective tax rate (average tax rate) - ✔✔measures the average tax an individual
pays on his or her entire income
,✔✔effective tax rate - ✔✔total federal taxes / taxpayer's total income =
✔✔capital gain income - ✔✔produced by owning capital assets
--things you own for investment or personal use
---stocks
---mutual funds
---coin collections
---other investments
---personal belongings
---car
---real estate
✔✔tax credit - ✔✔a dollar-for-dollar reduction in an assessed tax liability
✔✔negative effective tax rates - ✔✔-result when refundable tax credits exceed an
individual's total tax
--most common among low-income working households with dependent children and
college students
--bottom 20% of all households had an average effective federal tax rate of -9.2%
--next 20% of all households had an average effective income tax rate of -2.3%
✔✔refundable tax credits - ✔✔can reduce an individual's assessed tax below zero
✔✔nonrefundable tax credits - ✔✔can reduce an individual's assessed tax to zero bu
cannot make it negative
✔✔education tax credits - ✔✔-american opportunity credit
-lifetime learning credit
✔✔American opportunity credit - ✔✔partly refundable tax credit available to those who
claim a student as a dependent on their tax return
✔✔lifetime learning credit - ✔✔available to those who do not qualify for the american
opportunity credit
✔✔child-based tax credits - ✔✔-earned income credit
-child tax credit
✔✔earned income credit - ✔✔a refundable credit designed to reward work and boost
the earnings of low-income workers
✔✔child tax credit - ✔✔a maximum nonrefundable credit per qualifying child ($7,000 in
tax year 2018)
, ✔✔health insurance tax credits - ✔✔-advanced premium tax credit
-premium tax credit
✔✔advanced premium tax credit - ✔✔lowers the costs of monthly premiums of these
insurance plans
✔✔premium tax credit - ✔✔a refundable credit for those who do not have employer
health insurance and buy via state or federal health insurance exchanges
✔✔retirement savings credit - ✔✔retirement savings contribution credit
✔✔retirement savings contribution credit - ✔✔-congress lowers your taxes if you save
for the future through this
-a nonrefundable tax credit of up to $1,000 if you have:
--income below a certain amount and contribute to an IRA
--voluntary contributions to an employer-sponsored retirement plan
✔✔employee - ✔✔-your paycheck shows withholdings for FICA (payroll taxes)
-receives a W-2 statement
✔✔self-employed - ✔✔-there will be no FICA withheld
-receives 1099 statement at the end of the year
✔✔self-employment taxes - ✔✔-pay estimated tax payments quarterly:
--due 15 days after the end of each calendar quarter
✔✔self-employment tax - ✔✔-employee's share a FICA, plus employer's share of FICA
(15.3%) paid by self-employed individual
-if income is greater than $400, but less than $128,400
-for income greater than $128,400, the tax rate is 2.9%
✔✔7.65% - ✔✔the total Social Security tax rate is half of which is paid by the employer
and half by the employee (or all paid by the self-employed individual)
✔✔realized income - ✔✔when you convert one asset into a different one for a gain such
as: converting your human capital into a paycheck; selling your home that has
increased in value
✔✔recognized income - ✔✔when realized income is reported and taxed, which might
exclude: scholarships for tuition fees - scholarship income for tuition is exempt from
taxes
✔✔education-related expenses - ✔✔-tuition and fees paid
-book and course supply expenses
