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Regulation > Adjustments (above line) > Flashcards

Adjustments (above line) Flashcards

1
Q

Adjustments above the line
(to arrive at AGI)

R2-3

A

“HOMIES A SADIST” mnemonic

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2
Q

Adjustments above the line

“HOMIES A SADIST”

R2-3

A 
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

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3
Q

Educator Expenses

Who can deduct? How much?

R2-4

A

Adjustment to arrive at AGI =

    • up to $250 ($500 if both are teachers)
    • K-12 grade
    • ordinary and necessary exp
    • not for homeschooling exp
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4
Q

Deductible IRA (traditional/reg IRA)

Contributions are not tax-deductible when:

R2-4

A

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

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5
Q

Deductible IRA (Traditional/Reg IRA)

How much of the contribution is tax-deductible?

R2-6

A 
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

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6
Q

Roth IRA

Are contributions deductible?

R2-7

A

Not deductible

Contribution Limit:

  • -$5,500 ($11,000 MFJ) annually
    • combined w/ all other types of IRA
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7
Q

Roth IRA

Withdrawals/distributions

R2-7

A

Distribution of:

  • -principal = tax-free
  • -earnings (accumulated) = tax-free
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8
Q

Roth IRA

Phase-out income limits

R2-7

A

Modified AGI:
SS: $117k - $132k
MFJ: $184k - $194k
MFS: $0 - $10k

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9
Q

Nondeductible IRA

Contribution Limit

R2-8

A

Lesser of:

    • $5,500
    • individual’s compensation
    • limit not contributed to other IRAs
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10
Q

Nondeductible IRA

Distributions/withdrawals

R2-8

A

Distribution of:

  • -principal = tax-free
  • -earnings (accumulated) = taxable
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11
Q

Coverdell Education Savings Account
(education IRA)

Are contributions to Coverdell deductible?

R2-9

A

not deductible

max annual contribution limit:
–$2,000 per beneficiary

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12
Q

Coverdell Education Savings Account
(education IRA)

Contribution Requirements

R2-9

A
  • -for beneficiary under age 18
  • -max contribution is $2,000

Phase-out: if modified AGI is:
SS: $95k - $110k
MFJ: $190k - $220k

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13
Q

Interest Expense on Student Loan

How much can be deducted?

R2-10

A
  • -up to $2,500
  • -cannot be a dependent
  • -the parent cannot take deduction

Phase-out: when AGI is:
SS: $65 - 80k
MFJ: $130k - 160k

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14
Q

Tuition and Fees

How much is deductible?

R2-11

A

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

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15
Q

Tuition and Fees

When can you not deduct?

R2-11

A

If expenses were applied to:

  • -American Opportunity credit
  • -Lifetime Learning credit
  • -nontaxable ed. savings acct. distributions
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16
Q

Health Savings Account (HSA)

Requirements to take deduction

R2-11

A

Must have:

  • -high-deductible health insurance
  • -contributed up to $3,350 pre-tax (fam $6,750)
  • -used money for health care costs
17
Q

Moving Expenses

Requirements to take deduction

R2-12

A
  • -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)
18
Q

Moving Expenses

Items not allowed to deduct

R213

A
  • -meals
  • -pre-move house hunting
  • -exp of breaking lease
  • -cost of temp. living exp
19
Q

SE Tax

What amount of FICA is deducted to arrive at AGI?

R2-13

A

–50% of SE FICA (social security tax)

*this is not deducted on Schedule C

20
Q

SE Health Insurance

What amount is deductible to arrive at AGI?

R2-13

A

–All medical insurance premiums paid for SE taxpayer, spouse, and dependents.

*this is not deducted on Schedule C

21
Q

SE Retirement
Keogh (profit sharing) Plans

What amount is deductible to arrive at AGI?

R2-13

A 
Max annual amount:
Lesser of:
--$53,000
or
--20% of SE gross income before deduction

*this is not deducted on Schedule C

22
Q

What SE items are deductible to arrive at AGI that are not reported on Schedule C?

R2-13

A
  • -50% of SE FICA (ss tax)
  • -SE Health insurance premiums
  • -SE retirement (Keogh Plan)
23
Q

Interest Withdrawal Penalty

What is deducted?

R2-14

A
  • -interest forfeited for early withdrawal of savings

e. g. withdrawing funds from CD before maturity

24
Q

Alimony

Deductible or not?

R2-14

A

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
25
Q

Child Support

Deductible or not?

R2-15

A

not deductible to payor (husband)

26
Q

Property settlements

Deductible or not?

R2-15

A

not deductible to payor (husband)

not taxable to payee/recipient (wife)

27
Q

Attorney Fees for discrimination & whistleblowing

How much is deductible?

R2-15

A

limited to the amount claimed as income from judgement

  • -age, sex, or racial discrimination cases
  • -whistle-blower cases
28
Q

Domestic Production Activities

How much is deducted?

R2-15

A

–adjustment of 9% of production income

Deduction is for businesses of:

  • -architect
  • -engineering
  • -construction
  • -film production
  • -sale, rental or lease of manufactured equipment

Regulation (13 decks)

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