Adjustments and Deductions From AGI

Question 1

What is the Gross Income threshold that requires a couple (who is filing jointly) to file a tax return?

Answer 1

$24,000

NOTE: If the couple is 65 years or older they are allowed two additional standard deductions of $1,300

i.e. over 65 the threshold is $26,600

Question 2

WHAT is an “ad valorem” requirement?

Answer 2

IT means that a tax must be in proportion to the value of the property

i.e. This is a requirement for claiming a deduction for personal property tax

Question 3

WHAT amount of medical expenses can a taxpayer deduct for itemized deduction?

Answer 3

Any (Qualified) medical expenses in excess of 7.5% of their AGI

Question 4

WHAT is a taxpayers’ limit on contributions of long-term capital gain property to private non-operating foundations?

Answer 4

20% of the taxpayer’s Adjusted Gross Income (AGI)

Question 5

WHEN can a married filing jointly taxpayer (who is engaged in a specified service trade or business) claim the Sec. 199A deduction?

Answer 5

WHEN their taxable income is less than $415,000

NOTE: The threshold is $207,500 for all other taxpayers (e.g. Single, MFS, etc.)

Question 6

WHAT is the maximum amount a Single taxpayer can claim as a deductible amount for a Sole Proprietorship?

Answer 6

THE lesser of:

(1) 20% of QBI; or
(2) 2.5% of the unadjusted basis of qualified property (50% of W-2 wages IF there is no qualified property)

NOTE: This is when the taxpayers’ income is greater qualified property limit

Question 7

WHAT are considered qualifying charity donation(s) deductions made by a cash-basis individual taxpayer?

Answer 7

ANY expenses incurred in the rendering of services rendered to a qualifying charity (i.e. travel costs, mileage, supplies, etc.)

NOTE: The services themselves are NOT deductible

Question 8

HOW is Qualified Business Income (Losse(s)) handled under Sec. 199A?

Answer 8

They are carried over to the next year

i.e. If the net amount of qualified income, gain, deduction, and loss is Less Than zero, the loss must be carried over to the next year

Question 9

HOW would you treat taxes paid by an individual to a foreign country?

Answer 9

AS a credit against federal income taxes due

i.e. A taxpayer may elect either a credit or an itemized deduction for taxes paid to other countries (or U.S. possessions)

Question 10

WHAT is the maximum a taxpayer may deduct for a contribution to an IRA?

Answer 10

THE lesser of:

(1) $5,500 ($6,500 if 50 years old or older); OR
(2) The taxpayer’s compensation (i.e. gross income aka Earnings) for the year

Question 11

WHAT is the penalty if a taxpayer withdraws funds from their traditional IRA early?

Answer 11

A 10% penalty on the funds withdrawn

i.e. IRA distributions made before age 59 1/2 are subject to taxation as well as a 10% penalty

NOTE: The funds withdrawn are taxed at the “marginal tax rate”

Question 12

WHERE (i.e. on what form) is the Sec. 199A deduction taken?

Answer 12

AT the top of page 2 of Form 1040

Question 13

True or False.

Sec. 199A deduction reduces adjusted gross income (AGI)?

Answer 13

FALSE.

Sec. 199A deduction is not allowed in computing adjusted gross income

Note: Sec. 199A is instead allowed as a deduction reducing taxable income

Question 14

ON which tax Schedule would an individual proprietor deduct their tax on the fixed assets their business owns?

Answer 14

Schedule C

i.e. It is reported on Schedule C, which is used to report the income and expenses of a sole proprietorship

Question 15

HOW much can a taxpayer deduct in order to maintain an individual other than a dependent as a member of their household under a written agreement between the taxpayer and a qualified organization?

Answer 15

$50/ month

i.e. under a written agreement between the taxpayer and a qualified organization, the taxpayer may deduct up to $50 per month (e.g. educational opportunities)

Question 16

ON what tax form would a “Foreign income tax withheld at source on dividend received” be reported?

Answer 16

(1) Claimed in Form 1116 – Foreign Tax Credit; OR

(2) In Schedule A – Itemized Deductions

Question 17

WHAT is the basic “Standard Deduction” amount of a student (under age 24) who is claimed as a dependent on another individual’s income tax return?

Answer 17

The LARGER of:

(1) $1,050; or
(2) The student’s earned income plus $350

Question 18

WHat are the earned income thresholds for taxpayers’ that want to establish a Coverdell Education Savings Account (CESA) for their dependent child?

Answer 18

(A) Joint filers with modified AGI at or greater than $190,000 and less than $220,000

(B) Single filers with modified AGI at or greater than $95,000 and less than $110,000

Question 19

WHAT is the deduction LIMIT of an individual taxpayer’s interest on investment indebtedness?

Answer 19

THE taxpayer’s 2018 net investment income

i.e. IT is limited to the taxpayer’s 2018 net investment income

Question 20

WHAT are considered “qualified pass-through entities” that a noncorporate taxpayer may participate (i.e. invest in) to take advantage of the Sec. 199A deduction?

Answer 20

(1) Proprietorships
(2) S corporations
(3) Partnerships, Trusts, and Estates

NOTE: If taxpayer earns more than the “Phaseout” amount, then a “qualified trade or business” (1) is any trade or business other than a specified service trade or business and (2) other than the trade or business of performing services as an employee