Adjustments (above line) Flashcards
Adjustments above the line
(to arrive at AGI)
R2-3
“HOMIES A SADIST” mnemonic
Adjustments above the line
“HOMIES A SADIST”
R2-3
H --health savings account (HSA) O --one-half SE FICA M --moving expenses I --IRA E --Educator expenses S -- Student loan Interest expense
A –alimony
S –SE health insurance
A –attorney fees paid (discrimination & whistleblower)
D –Domestic Production Activities deduction
I –interest withdrawal penalty
S –SE retirement
T –tuition and fee deduction
Educator Expenses
Who can deduct? How much?
R2-4
Adjustment to arrive at AGI =
- up to $250 ($500 if both are teachers)
- K-12 grade
- ordinary and necessary exp
- not for homeschooling exp
Deductible IRA (traditional/reg IRA)
Contributions are not tax-deductible when:
R2-4
1) Excessive AGI = Rich
–SS/HH: $61k - $71k
–MFJ: $98k - $118k
AND
2) Actively participating in another Qualified Plan*
–Exception: indiv. is not active just bc spouse is.
(tested separately)
–Phase-out: if AGI is $184k-$194k = super rich
(tested together)
*each indiv. tested separately unless super rich, then tested together
Deductible IRA (Traditional/Reg IRA)
How much of the contribution is tax-deductible?
R2-6
Max deduction allowed: Lesser of: -- $5,500 ($11,000 MFJ) or -- individual's compensation (combined earnings if MFJ)
Catch-up Contribution:
If age 50+ => add’l $1,000 deduction
Roth IRA
Are contributions deductible?
R2-7
Not deductible
Contribution Limit:
- -$5,500 ($11,000 MFJ) annually
- combined w/ all other types of IRA
Roth IRA
Withdrawals/distributions
R2-7
Distribution of:
- -principal = tax-free
- -earnings (accumulated) = tax-free
Roth IRA
Phase-out income limits
R2-7
Modified AGI:
SS: $117k - $132k
MFJ: $184k - $194k
MFS: $0 - $10k
Nondeductible IRA
Contribution Limit
R2-8
Lesser of:
- $5,500
- individual’s compensation
- limit not contributed to other IRAs
Nondeductible IRA
Distributions/withdrawals
R2-8
Distribution of:
- -principal = tax-free
- -earnings (accumulated) = taxable
Coverdell Education Savings Account
(education IRA)
Are contributions to Coverdell deductible?
R2-9
not deductible
max annual contribution limit:
–$2,000 per beneficiary
Coverdell Education Savings Account
(education IRA)
Contribution Requirements
R2-9
- -for beneficiary under age 18
- -max contribution is $2,000
Phase-out: if modified AGI is:
SS: $95k - $110k
MFJ: $190k - $220k
Interest Expense on Student Loan
How much can be deducted?
R2-10
- -up to $2,500
- -cannot be a dependent
- -the parent cannot take deduction
Phase-out: when AGI is:
SS: $65 - 80k
MFJ: $130k - 160k
Tuition and Fees
How much is deductible?
R2-11
If AGI is:
- -Less than $65k (MFJ $130k)
- -up to $4,000
- -$65k - $80K
- -up to $2,000
- -over $80k
- -no deduction
-cannot take adj. if exp. applied to credits
Tuition and Fees
When can you not deduct?
R2-11
If expenses were applied to:
- -American Opportunity credit
- -Lifetime Learning credit
- -nontaxable ed. savings acct. distributions
Health Savings Account (HSA)
Requirements to take deduction
R2-11
Must have:
- -high-deductible health insurance
- -contributed up to $3,350 pre-tax (fam $6,750)
- -used money for health care costs
Moving Expenses
Requirements to take deduction
R2-12
- -Must be work related
- -New Workplace = 50mi farther from old house
- -39 week stay (75% of next year)
- -direct moving costs only (self and fam)
- travel and lodging
- transportation (ppl, household goods)
Moving Expenses
Items not allowed to deduct
R213
- -meals
- -pre-move house hunting
- -exp of breaking lease
- -cost of temp. living exp
SE Tax
What amount of FICA is deducted to arrive at AGI?
R2-13
–50% of SE FICA (social security tax)
*this is not deducted on Schedule C
SE Health Insurance
What amount is deductible to arrive at AGI?
R2-13
–All medical insurance premiums paid for SE taxpayer, spouse, and dependents.
*this is not deducted on Schedule C
SE Retirement
Keogh (profit sharing) Plans
What amount is deductible to arrive at AGI?
R2-13
Max annual amount: Lesser of: --$53,000 or --20% of SE gross income before deduction
*this is not deducted on Schedule C
What SE items are deductible to arrive at AGI that are not reported on Schedule C?
R2-13
- -50% of SE FICA (ss tax)
- -SE Health insurance premiums
- -SE retirement (Keogh Plan)
Interest Withdrawal Penalty
What is deducted?
R2-14
- -interest forfeited for early withdrawal of savings
e. g. withdrawing funds from CD before maturity
Alimony
Deductible or not?
R2-14
Deducted to arrive at AGI for the payor.
Requirements:
- -legally required to pay
- -must be in cash
- -payment ends upon death
- -cannot be in same household
- -payment cannot be designated as anything else
- -spouses cannot file jointly
- property settlements are not deductible
- if alimony includes child support, it applies first to child support & nondeductible
