4 Tax Core

Question 1

Tax Flow

4.116

Answer 1

• Income
• – Exclusions
• = Gross Income
• – Deductions for AGI (above-the-line)
• = AGI (Adjusted Gross Income)
• – Deductions from AGI (below-the-line), i.e., itemized deductions or standard deductions
• – QBI Deductions (Qual. Business Income)
• = Taxable Income
• × Tax Rates
• = Gross Tax
• – Tax Credits
• = Final Tax Due
• – Prepayments (Withholdings & Est. Payments)

Question 2

Exclusions for Gross Income

4.120

Answer 2

“F$!@er MADE ME DISC PADS”

employer-related
1. Fringe benefits
2. Meals & lodging for employees
3. Accident & health plans (employer premiums and received amounts)
4. Dependent Care Assistance Program (DCAP)
5. Education Assistance Program (up to $5,250 per year)

invmts
1. Muni bond interest
2. Education savings bonds interest (Series EE or Series I)

other
1. Death benefits
2. Inheritance & gifts
3. Scholarships
4. Compensatory (not punitive) damages comp
5. Personal residence sale (up to $250/$500K)
6. Adoption assistance (should be under employer-related section)
7. Discharged Debt (in certain circumstances)
8. Support payments received (child support + post-2018 alimony)

Question 3

Adjustments to Income
(for AGI / above-the-line)

4.124

Answer 3

SE-related (HRT)
- Health insurance premiums by SE workers incl. dental & long-term care insur (not avail. if other health insur. coverage options are avail. like a spouse’s employer-provided plan)
- Retirement acct contribs for self-employed & small biz owners (SEP, SIMPLE, & Qualified Plans)
- Tax: 1/2 of SE tax, excl. 0.9% additional medicare tax (TTs)

Other (“AMISH BEE”)
- Alimony out-payments for Pre-2019 agmts (pre TCAJA, tax cuts & jobs act)
- Moving expenses for active duty military
- IRA contribs
- Student loan interest up to $2,500
- HSA contribs w/ after-tax money (see HSA rules)
- Biz expenses for gov officials on a fee basis, performing artists, military reservists who traveled more than 100 miles to perform reserve services
- Educator expenses for classroom supplies, up to $300 per indiv ($600 for MFJ)
- Early withdrawal penalties of savings accts, like a CD

Question 4

Itemized Deductions
(“below-the-line”
or “from AGI)

4.128

Answer 4

the STATE does THEFT not CHARITY and I need a MORTGAGE to pay my MEDICAL

• State And Local Tax (SALT),$10K ceiling
• Theft & Casualty Losses - must be federally declared disaster; deductible losses = lesser of (FMV or basis) – insur pmts – $100 deductible – 10% of AGI (floor); only losses in excess of the AGI threshold are deductible
• Charity - up to 60% of AGI (ceiling) private vs public have different max deductions (pub charities cash ≤ 60% AGI, appreciated assets ≤ 30% AGI; for priv charities like foundations cash ≤ 30% AGI, apprec. assets ≤ 20%)
• Mortgage interest on up to $750K of debt (ceiling) for primary or secondary residence, limited to net invmt income
• Medical & dental expenses (unreimbursed), only what exceeds 7.5% of AGI (floor)

Question 5

Standard Deduction

4.32

Answer 5

• all on tax tables
• extra if (a) blind or (b) disabled
• if both blind AND disabled, you get both bonuses COMBINED
  (TTs give you age, amounts, etc)