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- earnings tax-free until withdrawn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- earnings taxed only when withdrawn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
Property Settlement
nontaxable to payee
nondeductible to the payor
One of the part of “hiDe it”
tuition and fee deduction
max $4k
has Robinhood rule
Qualified Charitable Contribution
=$300 adjustment ( $600 MFJ)
who don’t take itemized deduction can take this
only cash paid to public charities
