Above Line Deductions+Losses Flashcards
Remember: Above the Line Deductions reduce
the gross income to make it Adjusted Gross Income
Each educator can claim up to $250 annually
unreimbursed school supplies expenses as deductions
Health Savings Account, used in conjunction with a high deductible health plan,
are tax-exempt and count as above the line
Moving Expenses can be above the line IF
1) new place of work is 50+ miles farther from prior residence’s distance to work
2) employed 39+ weeks
3) cost of moving not reimbursed by employer
No indirect costs (meals, house hunting, etc) count
Net Self Employment Income is
Net Self-Employed Profits
* 92.35
If self-employed, FICA taxes paid to self
count as above the line deduction
- all deduction for self-employed share = 50% of Self-Employment Tax
For Qualified Retirement or Profit Sharing Plan:
lesser of 25% of self-employed earnings or $54K counts as deduction
Health Insurance for self-employed (where the insurance comes with the business)
is 100% deductible
ALIMONY – but not child support –
is deductible above the line
If partial payments are made to an agreement where both child support and alimony are due then
partial payments aren’t deductible and only count as child support (not alimony)
If IRA participation is done but is not through employer-maintained then
lesser of $5500 or 100% of includible compensation is deductible
IRA distributions before 59 and 1/2
subject to taxation plus 10% penalty
- If distribution was used for medical expenses and the expenses were more than 10% of AGI then penalty waived
Higher Education Loans:
$2500 of interest is deductible (subject to income limit)
Early withdrawal of Certificate of Deposit funds
deduction allowable for year that penalty was incurred
LOSSES for AGI: passive activities can qualify
all rental activity is passive
