Ch 6 - Terms (Itemized Deductions) Flashcards
Acquisition debt
Debt incurred to acquire, construct, or improve the taxpayer’s principal or secondary residence.
Charitable Contributions
Money or property donated to a qualified charitable organization. Such donations are deductible on Sched A as an itemized deduction.
Contribution
- Gift to a qualified charitable organization, generally deductible on Sched A. 2. Money placed in a retirement fund, such ans an IRA or an employer-maintained retirement plan.
General Sales Tax
A general sales tax is a sales tax imposed on retail sales of a broad range of items at a single rate.
Itemized deductions
Certain personal expenditures allowed by the Tax Code as deductions from AGI. Examples are certain medical expenses, qualified interest on home mortgages, and charitable contributions. Itemized deductions are reported on Form 1040 Sched A. A taxpayer who itemizes deductions cannot claim the standard deduction.
Medicare Part A
Medicare insurance for qualifying individuals who are age 65 or older or disabled. Medicare Part A covers hospital expenses, care in a skilled nursing facility, hospice care, and some health care. Most participants do not pay a monthly premium for this coverage if they or their spouse paid medicare taxes while working.
Medicare Part B
Medicare insurance for qualifying individuals who are age 65 or older or disabled. Medicare Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services. Most participants pay a monthly premium for this coverage, which is generally withheld from social security benefits. The average premium for 2017 is $109 per month. The premium is higher if the annual income is more than $85000/$170000(MFJ).
Medicare Part D
The medicare insurance premium withheld from the benefits of social security recipients who choose to pay for prescriptions through medicare.
Personal Property Tax
An annual tax imposed on certain personal property, such as cars or boats, and based on the value of the property.
Points
A term used to refer to: 1. Interest prepaid on a mortgage loan in order to obtain a lower rate of interest on the loan, or 2. A loan-origination fee. A buyer generally may deduct points as interest; fully in the year paid if for the purchase or improvement of a principal residence, or if not, then over the term of the loan.
Prepaid Interest
Interest paid in advance is deductible as an interest expense only as it accrues. The one exemption to this rule involves the interest element when a cash-basis taxpayer pays points to obtain financing for the purchase or improvement of a principal residence if the payment of points is an established business practice in the area in which the indebtedness is incurred and the amount involved is not excessive. Points paid to refinance a principal residence, however, must be deducted over the life of the loan.
Qualified Charitable Organization
An entity, usually an association or nonprofit corporation, designed to provide some form of public charity or service and specifically approved by the US Treasury as a recipient of deductible charitable contributions.
Standard Deduction
A base amount of income not subject to tax. The regular standard deduction is $6350 for single taxpayers and MFS, $9350 for HoH, and $12700 for MFJ and QW. Taxpayers who are blind and/or over age 65 have higher standard deductions. Taxpayers who may be claimed as dependents on other taxpayers’ returns may have reduced standard deductions
