Deck 7 Flashcards
Compensation includes:
salary, wages, commission, bonuses, and alimony
Roth IRA
No tax impact now or later; contribution limits are combined with all other types of IRA’s
Nondeductible IRA
Final option, fall back when not eligible for 1) deductible IRA and 2) Roth IRA; no tax adjustment
Coverdell Education IRA
No tax adjustment; nondeductible contribution; max contribution per beneficiary is $2,000 annually
The adjustment for education loan interest is limited to:
$2,500
Keogh plans
For a self-employed taxpayer subject to the self-employment tax; maximum deductible amount is limited to the lesser of: 53,000 or 25% net earnings
Calculation for max allowable deduction for a Keogh plan =
gross self-employment income x 20%
Itemized deductions may not be reduced below _____ of the amount allowed before the phase-out
80%
4 items not reduced by the itemized deduction phase out:
GIMC (gambling losses, investment interest expense, medical expense, casualty and theft
Schedule A
Personal expenses
Schedule E
Rental expenses
Deductible medical expenses formula =
qualified medical expenses - insurance reimbursement - 10% AGI
State, Local, and foreign taxes that can be taken as itemized deductions
1) real estate taxes, 2) income taxes, 3) personal property taxes, 4) sales tax
Nondeductible taxes
FIB (federal, inheritance, and business tax)
Types of interest expense:
HIPPE (Home, investment, personal, prepaid, education); personal interest is not deductible, education is an adjustment, not itemized deduction
