Deductions for AGI

Question 1

Where is the income from sole proprietorship reported? Where does this get transferred to?

Answer 1

Schedule C net of business deductions.

Page 1 of Form 1040 so these deductions are for AGI.

Question 2

Are deductions reported on Schedule E for rental property deductions for AGI or from AGI? Farming operations on Schedule F?

Answer 2

For AGI because it will be transferred to the form 1040.

Same.

Question 3

When is moving expense deductible?

Answer 3

If related to work at a new job (even if this is first job).

Question 4

What does deductible moving expenses include?

Answer 4

Moving household goods and personal items.

Traveling (lodging is included, but not meals) from the former residence to the new residence.

Question 5

Moving expenses: how is the automobile expenses computed?

Answer 5

By using a special rate provided.

Question 6

Moving expenses: what are 2 tests that needs to be met?

Answer 6

• Distance test: The new job’s location must be at least 50 miles plus the distance to the old job further from the old residence (new house not involved).
• Time test: must be working 39 wks out of 12 months following the move (78 wks during 24 months if self-employed and 39 wks must fall within the first 12 months).

Question 7

Moving expenses that are non deductible?

Answer 7

Meals, cost of selling off or purchasing new home, car license/registration costs, driver’s license fees, house hunting costs, travel cost to former home, temporary living costs in new location.

Question 8

Are interest on education loans deductible? Maximum limit? Phase-out? Criteria?

Answer 8

Yes.
$2,500.
Yes for high income TPs.
A student must be enrolled at least part time.

Question 9

Definition of education loans?

Answer 9

Loan to pay higher education expenses for the TP and spouse, dependents.

Question 10

When is a TP not allowed deduction?

Answer 10

When the TP can be declared as a depended by someone else.

Question 11

Is alimony deductible? By who?

Answer 11

Yes by payor.

Question 12

When are 100% of the costs of health insurance premiums deductible?

Answer 12

For those TPs who are self-employed as long as the amount does not exceed the TP’s net earnings from self-employment and TP is not working for anyone else who offer insurance.

Question 13

Are contributions to health savings accounts deductible? When? Limit?

Answer 13

Yes.
At the time contributions are made.
Individuals: $3,350.
Married:  6,650.
Additional for those over age 55.

Question 14

Are distributions from health savings account taxed?

Answer 14

No, not include in income.

Question 15

HSA: Tax implications for non-qualified distributions?

Answer 15

Included in gross income and subject to 20% penalty.

Question 16

HSA: are medicine and drugs qualified distributions?

Answer 16

Yes, if they are prescriptions drugs or insulin.

Question 17

HSA: when can a health plan be qualified as HSA?

Answer 17

A TP must be covered only under a high-deductible health plan and may not be entitled to benefits under MC.

Question 18

Are forfeiture penalties deductible for AGI?

Answer 18

Yes.

Question 19

Are repayment of jury duty fees to employer deductible?

Answer 19

Yes as long as the employer pays the normal wage as well.

Question 20

Are qualifying higher education expenses deductible? Maximum?

Answer 20

Yes up to $4,000.

Question 21

Are educator expenses deductible? Maximum?

Answer 21

Yes up to $250.

Question 22

Is self-employment tax deductible?

Answer 22

One-half of self employment taxes as computed on Schedule SE is allowed as a deduction for AGI.

Question 23

What is the tax treatment for contributions by self-employed individuals to a qualified retirement plan (Keogh Plan)?

Answer 23

A deduction for AGI.