Chapter 4 - Exclusions From Gross Income Flashcards
The value of a gift is ___________ from gross income.
excluded
A gift cannot be payment for…
services rendered.
If you start earning income from property that is gifted to you, then you will be…
taxed on the income from that property.
Inherited property is…
excluded from your gross income.
Any income earned on inherited property, including the sale of the inherited property is taxed to…
the person that received the inheritance.
“Interest income” from state and municipal bonds are ____________ from gross income.
If you sale the bond and get more than what you paid for the bond, then the gain is __________ as _________________.
excluded
Taxed as capital gains
This is to encourage people to invest in these type of bonds.
“Interest Income” earned from qualified private activity bonds and non-governmental purpose bonds are subject to…
alternative minimum tax.
Interest income from US treasury bills, notes, and bonds is ___________ in gross income.
included
Treasury bills are taxed at when it reaches…
maturity.
Treasury bills are often taxed exempt for…
state and local tax purposes.
Interest on a Series EE savings bonds is __________ from your gross income if it’s use to pay…
excluded
qualified education expenses.
Interest on a Series EE savings bonds is phased out based on…
AGI level.
Up to ____% of social security benefits may be taxable.
85%
How you are taxed on your social security benefits depends on your…
“provisional income”.
What is the calculation for your provisional income?
AGI +
half of SS Benefits +
tax exempt interest income =
“PROVISIONAL INCOME”
Which tells you how much of your SS is taxable.
The taxation of your SS Benefits is based on your range of provisional income. What are the ranges for singles and married people?
Single: $25K - $34K
Married: $32K - $44K
$0 taxes below, 50% in between, 85% over the threshold
_____________ plans are the only employer offered benefits that are given on a discriminatory basis.
Disability
Noncontributory disability plan is when the ______________ pays the entire cost of the premium and a contributory disability plan the ______________ pays the entire cost of the premiums.
employer
employee
Noncontributory disability premiums are tax-deductible for…
the employer.
Benefits received from premiums paid by an employer for a “nondiscriminatory disability plan” is ____________ to the employee.
taxed
Benefits received from a “contributory disability plan” are __________ to the employee.
tax-free
In a “partially contributory disability plan”, a portion of the benefit is taxable based on…
the amount each party contributes.
Do you pay taxes on Worker’s Compensation benefits?
You “NEVER” pay taxes on Worker’s Compensation benefits.
Fuck that!!!
If you are involved in a lawsuit, and you receive a settlement award because of injuries or sickness, do you pay taxes on this money?
No. But you do you pay taxes on libel/slander, wage losses, and “punitive” damages.
Health benefit plans (e.g. HMO, PPO) are tax-deductible when…
the employer pays the premium.
Health benefit plans (e.g. HMO, PPO) ________ taxed to State Farm employees.
are not
Amounts received for medical care from an employer sponsored medical plan (e.g. HMO, PPO) are ___________ from the employees gross income.
excluded
As long as it’s for medical reimbursement 😷or loosing a limb. 🙀
Amounts received for employer sponsored long-term care are ___________ for employees.
tax free
An uninsured plan for employers to reimburse employees, tax-free, for their medical expenses directly from an account.
self-funded medical reimbursement plans
Some medical insurance plans allow discrimination testing to qualify for the medical plan, however “self-funded medical reimbursement plans” you…
can not discriminate.
A “self-funded medical reimbursement plan” is considered discriminatory if it provides greater benefits to…
highly compensated employees.
A “self-funded medical reimbursement plan” is considered discriminatory if it provides benefits based on…
a percentage of compensation.
________ procedures are not included in a “self-funded medical reimbursement plan” when considering the nondiscrimination rule.
Diagnostics
If a “self-funded medical reimbursement plan” turns out to be discriminatory, then the excess benefits given to highly compensated employees are…
taxed.
If a “self-funded medical reimbursement plan” turns out to be discriminatory, and only the employees are given the benefits, then…
all benefits will be taxed.
The cost of dependent care services provided by an employer are _________ from the gross income of the employee.
excluded from the gross income of the employee.
If State Farm paid the cost for “dependent care services” provided by my 19 year old daughter, would that money be excluded from my gross income?
Yes
For “dependent care services” provided by State Farm, what is the maximum amount that will be excluded from your gross income if you were single or if you were married?
$5,000 for single or married filing joint
$2,500 for married filing separate
John’s federal marginal tax rate is 35%. He is considering investing in a tax-free bond issued in his state of residence which yields 4%. What is the taxable equivalent yield of this bond?
.04 / ( 1 - .35 ) = 6.15%
If the employer provides disability insurance coverage, the disability benefit proceeds are…
taxable to the employee when received.
