Chapter 1 Flashcards
Adjustments (deduction to arrive at AGI)
Educator expense, IRA, Student loan interest expense, tution and fee deduction, HSA, moving expense, 1/2 self employment FICA, self employeed health insurance, self employeed retirement, interest withdrawl penalty, alimony paid
Itemized deductions (below the line)
medical, taxes state and local, interest expense, charity, casualty and theft, misc, other misc
Medical threshold (itemized ded)
in excess of 10% AGI
Charity threshold (itemized ded)
up to 50% of AGI
Casualty and theft threshold
in excess of 10% AGI
Miscellaneous
in excess of 2% AGI
Payment of tax with extension
October 15- however the due date for payment of taxes remains april 15
Qualifying widow(er)
File jointly for two years after spouse’s death, the surving spouse must maintain a household for the dependent (son, stepson, daughter or stepdaughter blood or adoption) for the WHOLE taxable year
Head of household
not married/ can be legally spearated or is married and lived apart from spouse for the last six months, not a qualifying widow, maintains a home for HALF the taxable year for son or daughter stepchildren- a dependent parent is not required to live with they can be in nursing home but taxpayer must pay over 1/2 the cost to upkeep their palace, or dependent relatives (cousings, foster paretns do not count)
Widow/widower
Whole year
Head of household
more than half a year
2015 exemption
$4k
IF a person is born or dies during the year
he or she is entitled to a personal or dependency exemption for the entire year
Qualifying Child
“CARES”
Close relative
Age Limit (>19/24 college)
Residency and filing requirements (mor ethan 1/2 tax year - cannot file joint return)
Eliminate Gross income test
Support test changes (child does no cotnribute more than 1/2 of support)
Qualifying Relative
“SUPPORT”
Support (over 50%) test
Under a sepcific amount of taxable gross income test (dependent cannot exceed taxable income of $4k - nontaxable income is OK social secruity, state and muni interest income, tax exempy scholarships)
Precludes dependent filing a joint tax return test
Only citizens (residents of US Canada or Mexico) test
Relative test (children, grandchildren, parents, grandparrents, brothers, sisters, stepchilden, in laws)
or
Taxpayer lives with individual whole year test (a non relative who lives with taxpayer entire year)
Multiple support agreements (qualifying relative exemption test)
a contributor must have contributed more than 10% of the person’s support and the joint contributors are required to file a multiple support declaration
Taxable
FMV
Passive income
only passive losses can offset passive income
Cancelleation of debt
all debts cancelled are included in gross income
Partially taxable fringe benefits-portions of life insurance premiums
premiums above the first $50k of coverage are taxable income to the recipient
Bargain purchase
if an employee sells property to the employee for less than FMV , the difference is income to employee
Non-taxable fringe benefits
life insurance proceeds - however, the interest income element on a deferred payout arrangement is fully taxable
Accident, medical and health insurance
Premium payments are excluded from employees income when the employer paid the insurance premium
Employer payment of employee education expenses
Up to $5,250 may be exlcuded from gross income (undergrad and grad)
Interest paid by the federal or state govt for a late payment of a tax refund is
TAXABLE INCOME
State and local govt bonds/ obligations
interest on state and local bonds are tax exempt.
mutual fund dividends for funds invested in tax free bonds
are also tax exempt
Series EE interst
education expenses- interest is tax exempt when it is used to pay for higher education (reduced by tax free scholarships) of the taxpayer, spounds ,depdendents (the taxpayer is over 24 when issued) - there is a phaseout
Uneared income of a child under 18 (kiddie tax)
the net unearned income of a dependent child under 18 or 24 who does not provide over half of his support and is full time student) is taxed at the parents higher tax rate
Any uneared child income over 2100 is taxed at parents rate
1
Qualified dividends holding period
stock must be held for more than 60days during 120 day period that begins 60 days before the ex dividend date
Tax free distirbutions
Return on capital, stock split, stock dividend, life insurance dividend
State and local tax return refunds
Itemized in PY=state or local refund is taxable
Std deduction used in prior year - nontaxable refund
INTEREST INCOME IS TAXABLE
Gifts and inheritence
are tax free to receiver
If second residence is personally used more than XXX days, any net los from the rental of the property will be dissallowed
14 days - and all related expenses must be prorated between the personal use portion and the rental activity potion
Requirements for payments of alimony are th efollowing:
payment must be in cash or CE, payment canot extend beyond death, payments must be legally required,
alimony is
income to the spouse and deductible to arrive at AGI for contributing spouse
Child support is
nontaxable to wife and not deductible by payee
Uniform capitalization rules for capitalizing inventory
direct materials, direct labor, FOH should be capitalized
warehouing cost, quality control, taxes= factor overhead items
Damages for personal injury (workers compnesation) are
excluded from gross income
cash basis taxpayers deduct interest in the year paid or the year to which the interest relates- whichever is later
3
prepaid interest
mudt be prorated over the time for which the payment is made,.
Forumla to determine net rental income or loss
Gross Rental Income Prepaid rental income Rent cancallatoon payments Imporvments in lieu of rent (rental expenses) Net Rental Income (loss)
Vacation home rented less than 15 days
treated as a personal residence, and rental income is excluded from income - - - mortage interest and real estate taxes are allowed as itemize deductions - - - depreciation, utilities and repairs are not deductible
Vacation home rented more than 15 days (and is used for personal purposes for greater of 14 days or 10% of rental days) it is treated as personal residence.
Expenses must be pro rated between personal and rental
Gains and losses of stock must be recognized on the
trade date
If you withdraw retirement money before 59 1/2 what is the penalty
10%
IS the marginal rate or effective tax rate used?
Marginal rate
Passive activity losses are fully deductible in year of sale
true
HIM DEAD - retirement distribution exceptions
Home buyer (first time $10,000 max if used towards first home
Insurance (medical)
Medical expesnes in excess of 10% of AGI (7.5% if 65 over)
Disability
Education
and
DEATH
Taxable as ordinary income
What is taxable of group term life insuarnce?
The first $50k is non-taxable fringe benefit
Property settlements
If a divorce settlement provides for a lump sum payment or property settlement by a spouse, that spouse gets no deduction for payments made and the payments are not includable in gross income of the spouse receiving the payment
