Adjustments Flashcards
Adjustments
Vs.
Itemized deduction
adjustments can be taken alone
whereas itemized deduction has to be taken as a group and compare to standard deduction to see if it can be taken or not
Adjustments for AGI
Above the line ( AGI)
deductions to arrive at AGI
Not deducted on Schedule C:
- Deductible part of self-employment tax
- self-employed health insurance deduction
- deduction for contributions to certain self-employed retirements plans
………………………………….
- educator expense
- traditional IRA contribution deduction
- student loan
- health saving account deduction
- moving expenses ( only for U.S armed forces moving pursuant to military order)
- alimony paid ( before 2018)
- tuition and fees deduction
- attorney fees paid in certain discrimination (age , sex, racial) and whistleblower cases
- qualified charitable contribution ( up to $300)
-educator expense
(1) educator expense :
$250 of qualified expenses paid
kindergarten through grade 12 educator
do not include homeschooling expense
- traditional IRA contribution deduction
- student loan
- health saving account deduction
- moving expenses ( only for U.S armed forces moving pursuant to military order)
- alimony paid ( before 2018)
- tuition and fees deduction
- attorney fees paid in certain discrimination ( age , sex, racial) and whistleblower cases
- qualified charitable contribution ( up to $300)
-traditional IRA contribution deduction
-traditional IRA contribution deduction (individual retirement accounts)
Annual Contribution is limited to Lesser of:
Under Age 50
Unmarried 6000 OR earned income
Married 12000 OR earned income
Age 50 or over
Unmarried 7000 OR earned income
Married 14000 OR earned income
** his income is her income
Deductible traditional IRA
- contributions should be made before April 15( filling extensions are not considered)
- earnings tax-free until withdrawn
- distributions ( principal and earnings) are taxable as ordinary income
- subject to a penalty of early withdrawal
- required min distribution ( RMD) when reaches age 72
Limitation of deduction
1) In retirement plan AND
2) Rich
Threshold
phase out range
single = 10 k
MFJ = 20 k
Single 65,000 - 75,000
MFJ 104,000 - 124,000
Nondeductible Traditional IRA
Final option - use when NOT eligible for deductible or ROTH
- no deduction when contributed
- earnings taxed only when withdrawn
- Distribution: earnings ( taxed as ordinary income )
principal ( not taxed as not allowed for deduction) - RMD : when reaches age 72
- No phase-out ( disallowed) based on high income ( MAGI)
ROTH IRA
- contribution is not deducted
- distribution:
principle : non taxable as they are not deducted
earnings: qualified earnings are tax free
Qualified distribution: - made at least 5 years ago AND One of the following : - 59 and half or older - disabled - first time homebuyer - taxpayers death
Age 72 do not apply to ROTH IRAS - because ROTH is not taxable
Early distribution Penalty ( IRA)
If distributions taken before the taxpayer reaches 59 and half
Regular tax + 10% penalty
Exception for a penalty ( will still have the regular tax)
if distribution used for CHIME
- Child ( birth or adoption)
- Home
- Insurance
- Medical
- Education ( qualified higher education expenses)
-student loan
student loan
- Limited to 2500 per year
- any extra interest expense is personal and not deductible ( disallowed itemized deduction)
- it is phased out
Unmarried 70k - 85k
MFJ 140k - 170k
- dependents cant take it
Rollover from Traditional to ROTH IRA
- amount transferred is taxed as if it is distributed ( just regular, no penalty)
- health saving account deduction
- moving expenses ( only for U.S armed forces moving pursuant to military order)
- alimony paid ( before 2018)
- tuition and fees deduction
- attorney fees paid in certain discrimination and whistleblower cases
- qualified charitable contribution ( up to $300)
-health saving account deduction
-moving expenses
( only for U.S armed forces moving pursuant to military order)
-alimony paid ( before 2018)
-tuition and fees deduction
-attorney fees paid in certain discrimination and whistleblower cases
-qualified charitable contribution ( up to $300)
Not deducted on Schedule C:
- Deductible part of self-employment tax
- self-employed health insurance deduction
- deduction for contributions to certain self-employed retirements plans
Not deducted on Schedule C:
(1) Deductible part of self-employment tax
50% social security tax ( you pay both employer and employee)
………………………………..
(2) Self-employed health insurance deduction
- may deduct all
…………………………………….
(3) deduction for contributions to certain self-employed retirements plans
SEP IRA ( Simplified employee pension)
max contribution is lesser of
- 20% of self-employment income reduced by one-half of self-employment tax deduction OR
- 57k
SIMPLE IRA ( saving incentive match plan for employees)
lesser of
- 100% of self-employment net income reduced by one-half of self-employment tax deduction OR
- 135k ( 160k for age 50 or older)
SOLO 401(k)s
- 20% of self-employment income reduced by one-half of self-employment tax deduction OR
- 57k ( 63,500 for age 50 or older)
Penalty on early withdrawal of savings(interest income) : interest forfeited
do not net against interest income
Alimony income
if an agreement signed in 2018 and before - it is the adjustment
if an agreement is after 2018 - not applicable
Child support
nontaxable to payee
nondeductible to the payor
IF a “dead beat dad”
first goes to child support then alimony
