Adjustments/Deductions

Question 1

educator expenses

Answer 1

adjustment

up to $250/$500

Question 2

IRA

Answer 2

adjustment ($5500/$11k)
unless:
- RICH ($60-70k or $96-110)
- HAS retirement plan

phaseout: excess/range * max deduction
Roth NOT deductible

Coverdell $2000/child/year

Question 3

student loan interest expense

Answer 3

adjustment
up to $2500
phaseout range

Question 4

tuition/fee deduction

Answer 4

adjustment

up to $4000

Question 5

health savings account

Answer 5

adjustment
up to $3300/$6550 (families)
increased by $1000 for age 55

Question 6

moving expenses

Answer 6

adjustment

NOT meals, pre-move house hunting, expense of breaking lease, temporary living expenses

Question 7

50% of S/E FICA

Answer 7

adjustment

non-deductible on Schedule C

Question 8

S/E health insurance

Answer 8

adjustment (100% deductible)

non-deductible on Schedule C

Question 9

S/E retirement

Answer 9

adjustment
non-deductible on Schedule C
Keogh plan up to $52k or 25% net earnings (lesser of the two)

Question 10

interest withdrawal penalty

Answer 10

adjustment

Question 11

alimony paid

Answer 11

adjustment

child support not deductible

Question 12

attorney fees (discrimination/whistle-blower cases)

Answer 12

adjustment

Question 13

domestic production activities

Answer 13

adjustment

9%?

Question 14

adjustment

Answer 14

deductions above AGI

Question 15

deduction

Answer 15

deductions below AGI

Question 16

additional deduction

Answer 16

elderly (65+) and/or blind

Question 17

standard deduction

Answer 17

$6200 single / $12400 married

higher of $1000 or earned income + $350 for dependent

Question 18

medical expenses

Answer 18

deduction

qualified expenses (medical/accident insurance)
- reimbursements
- 10% AGI (7.5% elderly)
= deductible amount

non-deductible:

• life insurance
• capital expenditures

Question 19

real estate taxes (state/local/foreign)

Answer 19

deduction

Question 20

income taxes (state/local/foreign)

Answer 20

deduction

Question 21

personal property taxes (state/local/foreign)

Answer 21

deduction

Question 22

state taxes

Answer 22

deduction

Question 23

federal taxes

Answer 23

NOT a deduction

including social security

Question 24

inheritance taxes

Answer 24

NOT a deduction

Question 25

business/rental property taxes

Answer 25

NOT a deduction

Question 26

home mortgage interest

Answer 26

deduction allowed on 1st or 2nd home - up to $1MM ($500k MFS) for buying, constructing, improvement (acq) FULLY DEDUCTIBLE - up to $100k ($50k MFS) for any purpose (non-acq)

Question 27

investment interest expense

Answer 27

``` deduction up to net (taxable) investment income - portfolio income - rents, royalties - net LT and ST capital gains ```

Question 28

interest expense to purchase tax-free bonds

Answer 28

NOT a deduction

Question 29

personal (consumer) interest

Answer 29

NOT a deduction | interest on borrowed funds, credit cards, life insurance loans

Question 30

interest on federal/state/local tax

Answer 30

NOT a deduction

Question 31

prepaid interest

Answer 31

deduction when incurred AND paid

Question 32

educational loan interest

Answer 32

adjustment | up to $2500, excess not allowed

Question 33

charitable contributions

Answer 33

deduction (unless not itemizing) up to 50% of AGI (cash) up to 30% of AGI (FMV of property of LT capital gain) ST capital gain valued at lower of cost or FMV services (nondeductible) carryover 5 years

Question 34

gifts

Answer 34

NOT a deduction

Question 35

political contributions

Answer 35

NOT a deduction

Question 36

casualty/theft losses

Answer 36

deduction ``` loss - insurance recovery - $100 - amount exceeding 10% AGI = deductible loss ```

Question 37

unreimbursed business expense

Answer 37

``` deduction up to amount exceeding 2% of AGI - overnight business travel - transportation 100% - meals/entertainment 50% ```

Question 38

educational expenses

Answer 38

deduction | those not deducted above AGI

Question 39

miscellaneous expenses

Answer 39

deduction (amount exceeding 2% of AGI) - uniforms - business gifts ($25/recipient/year) - professional journals - tax prep fee - debit card convenience

Question 40

gambling losses

Answer 40

deduction up to gambling winnings

Question 41

child/dependent care

Answer 41

tax credit 20% of expenses if AGI of $43k 35% of expenses if AGI $15k or less decrease by 1% for each $2k of AGI over $15k or less

Question 42

elderly and/or permanently disabled

Answer 42

tax credit | 15% of eligible income

Question 43

tax credit

Answer 43

reduces income tax liability

Question 44

American opportunity credit

Answer 44

tax credit | first 4 years, $2500 per person

Question 45

Lifetime learning credit

Answer 45

tax credit | after first 4 years, $2000 max

Question 46

qualified tuition program

Answer 46

tax credit for 529 accounts | exempt from federal income taxation

Question 47

adoption credit

Answer 47

tax credit

Question 48

IRA credits

Answer 48

tax credit | eligible for taxpayers at least 18 by close of taxyear, not full time student, not a dependent

Question 49

earned income credit

Answer 49

refundable tax credit

Question 50

withholding tax

Answer 50

tax credit against taxpayer's liability | refund if credit exceeds liability

Question 51

alternative minimum tax (AMT)

Answer 51

ensures minimum payment of tax for those who take large number of deductions pay greater of regular tax OR tentative min tax

Question 52

AMT exemption formula

Answer 52

INDIVIDUAL $52,800 - 25% (AMTI - $117,300) exemption cannot be less than 0

Question 53

AMT adjustments | PANICTIMME

Answer 53

``` [ADJUSTMENTS] (adds/subtracts) Passive activity losses Accelerated depreciation Net operating loss of taxpayer Installment income of dealer Contracts (%age completion vs completed) ``` [DEDUCTIONS] (adds to regular tax income) Tax "deductions" Interest deductions on home equity loans Medical deductions (excess 10% AGI) Miscellaneous deductions NOT allowed Exemptions (personal) and standard deduction

Question 54

AMT preferences | PPP

Answer 54

always add backs Private activity bond interest income Percentage depletion the excess over adjusted basis property Pre-1987 accelerated depreciation

Question 55

AMT credit | FACCE

Answer 55

``` offsets regular tax only not future AMT Foreign tax credit Adoption credit Child tax credit Contributions to retirement plans Earned income credit ```

Question 56

AMT credit carryforward period

Answer 56

forever