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Deductions from AGI (below line) Flashcards

1
Q

Standard Deduction

How much is the deduction?

R2-15

A

–1040 EZ => automatically took standard deduction

  • don’t need to know amounts
  • -$6,300 SS
  • -12,600 MFJ
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2
Q

Standard Deduction

elderly and blind

R2-16

A
  • -they receive an additional/increased deduction
  • -do not get additional exemption

SS: $1,550 per event
MFJ: $1,200 per event per spouse

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3
Q

Itemized Deductions Phase-out

When is it Phased-out?

R2-16

A

If AGI exceeds:

  • -SS $259,400
  • -MFJ $311,300
  • -MFS $155,650
  • -itemized deductions reduced by 3% of amount exceeded
  • -cannot reduce below 80%
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4
Q

Medical Expenses

What is deductible?

R2-18

A

Can itemize medical expenses paid for:

  • -filing taxpayer
  • -spouse
  • -dependent receiving >50% support
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5
Q

Medical Expenses

When is it deductible?

R2-18

A
  • -exp. paid or charged in CY
  • -payments made for dead spouse

–any payments made by insurance reduce qualified amount

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6
Q

Medical Expenses

How much can be itemized?

R2-19

A 
Qualified Medical Exp
-insurance reimbursement
=Qualified Medical Exp Paid
-10% AGI
=Deductible Medical Exp
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7
Q

Medical Expenses

How much can be itemized?

R2-19

A

–qualified medical exp. that exceed amount paid by insurance and that exceed 10% of AGI (7.5% if 65yrs)

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8
Q

Medical Expenses

What expenses are deductible (itemized)?

R2-19

A
  • -medicine and prescription drugs
  • -medicare D premiums
  • -doctors
  • -medical and accident insurance
  • -required surgery
  • -transportation to medical facility
  • -physical disabled costs
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9
Q

Medical Expenses

Can life insurance be itemized?

R2-19

A

–life insurance is not deductible

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10
Q

Medical Expenses

Can health club memberships be itemized?

R2-19

A

–not deductible unless recommended by doc for specific illness

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11
Q

Medical Expenses

Can transportation to medical facility be itemized?

R2-19

A

Yes, they are deducted

  • -actual cost
  • -allowance $0.19/mi
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12
Q

Medical Expenses

What expenses cannot be itemized?

R2-19

A

Non Qualified Medical Expenses:

  • -elective/cosmetic surgery
  • -vitamins
  • -over-the-counter meds
  • -life insurance
  • -capital expenditures (e.g. ramps)
    • (up to the increase in FMV of property)
  • -health club memberships
  • -personal hygiene
  • -diaper service
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13
Q

Taxes

What taxes can be itemized?

R2-20

A
  • -state
  • -local
  • -foreign
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14
Q

State, Local, Foreign Taxes

Which taxes can be itemized?

R2-20

A

“RIPS” mnemonic

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15
Q

State, Local, Foreign Taxes

Which taxes can be itemized?
“RIPS” mnemonic

R2-20

A

R–Real Estate taxes
I–Income Taxes
P–Personal property taxes
S–Sales Tax

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16
Q

Itemized Deductions

What types of expenses can be itemized?

R2-17

A
  1. Medical Exp.
  2. Taxes (state, local, foreign)
  3. Interest (Home, Investment, Personal, Prepaid, Education)
  4. Charity
  5. Casualty and theft
  6. Misc.
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17
Q

State, Local, Foreign Taxes
Real Estate
(“R” in RIPS mnemonic)

What can be itemized?

R2-20

A
  • -obligations to pay
  • -taxes paid under protest
  • -real estate taxes do not include:
    • street
    • sewer
    • sidewalk assessment taxes
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18
Q

State, Local, Foreign Taxes
Income Taxes
(“I” in RIPS mnemonic)

What can be itemized?

R2-20

A
  • -estimated taxes paid in CY
  • -taxes withheld from paycheck in CY
  • -assessments paid in CY for PY taxes

*can deduct state and local income taxes or sales taxes

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19
Q

State, Local, Foreign Taxes
Personal Property Taxes
(“P” in RIPS mnemonic)

What can be itemized?

R2-20

A

property taxes

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20
Q

State, Local, Foreign Taxes
Sales Taxes
(“S” in RIPS mnemonic)

What can be itemized?

R2-21

A

can deduct:
–state and local income taxes
or
–state and local sales taxes

*deduct total actual amount or use IRS table

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21
Q

State, Local, Foreign Taxes

What taxes cannot be itemized?

R2-21

A

“FIB” mnemonic

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22
Q

State, Local, Foreign Taxes

What taxes cannot be itemized?
“FIB” mnemonic

R2-21

A

Non Deductible Taxes:

F – Federal taxes (including SS)
I – Inheritance taxes for states (fed. estate pick-up tax)
B – Business (Sch C) and Rental taxes (Sch E)

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23
Q

Interest Expense

What can be itemized?

R2-21

A

“HIPPE” mnemonic

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24
Q

Interest Expense

What can be itemized?
“HIPPE” mnemonic

R2-21

A 
H -- Home Mortgage Interest
I -- Investment Interest Expense
P -- Personal Interest = not-deductible
P -- Prepaid Interest
E -- Educational Loan = not itemized
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25
Charitable Contributions What contribution is deductible? R2-23
--items given to organizations Not deductible: - -gifts- items given to individuals - -political contributions - -services
26
Charitable Contributions What amount can be itemized? R2-23
Overall Limit = 50% of AGI --Cash = can be all 50% --Property = 30% of AGI -lesser of basis or FMV --L-T appreciated property = - lesser of 30% AGI or -the remaining amount to reach 50% after cash contributions
27
Charitable Contributions How much can be deducted if not itemizing? R2-25
Charitable contributions cannot be deducted if not itemizing
28
Charitable Contributions When can it be itemized? R2-25
- -when paid (cash or check) | - -when charged (credit card)
29
Charitable Contributions Can you itemize services given to an organization? R2-25
--services are not deductible
30
Charitable Contributions Excess contributions can be CF,CB, or lost? R2-25
- -CF - 5 years | - -CF in FIFO basis
31
Interest Expense Home Mortgage Interest ("H" in HIPPE mnemonic) What is deductible? How much? R2-21
--1st or 2nd home Acquisition Indebtedness - incurred in buying, constructing, improving home - -max: $1 million ($500k MFS) - -excess is not deductible ``` Home Equity Indebtedness --max: $100k ($50k MFS) --lesser of: -$100k ($50k MFS) or -FMV reduced by original debt --excess is not deductible ```
32
Interest Expense Investment Interest Expense ("I" in HIPPE mnemonic) What is deductible? R2-22
Include in Inv. Inc. - -interest and dividends - -dividends - -royalties - -net L-T and S-T capital gains Exclude in Inv. Inc. --interest exp used to buy tax-free bonds Deductible Limit: - -net of taxable investment income - -excess is CF forever or until disposed
33
Personal Interest ("P" in HIPPE mnemonic) Is it deductible or not? R2-23
Personal Interest = Not-deductible - -personal note to a bank/person for borrowed funds - -life insurance notes - -bank credit cards - -purchase of personal property (car, tv, clothes) - -interest on federal, state, local tax underpayments
34
Prepaid Interest ("P" in HIPPE mnemonic) Is it deductible or not? R2-23
- -deducted when incurred and paid | - -allocate over the period of the loan
35
Education Loan Interest ("E" in HIPPE mnemonic) Is it deductible or not? R2-23
Education Loan interest is not itemized * it is an adjustment to arrive at AGI - -max $2,500 - -excess not deductible
36
Casualty and Theft Losses How much is deductible from AGI? R2-26
--Can deduct for non-business property Loss must exceed: - -10% of AGI - -$100 per event ``` Calculation: 1) Lesser of: --lost cost/adj. basis or --decreased FMV (FMV before loss-after) 2) Reduce it by insurance reimbursement 3) Reduce it by $100 per event 4) Reduce it by 10% of AGI ```
37
Miscellaneous Itemized Deductions What are they? R2-27
--must exceed 2% of AGI as a group ``` 1--unreimbursed business exp 2--educdational exp (CPE) 3--uniforms 4--business gifts ($25 limit) 5--business use of home 6--employment agency fee 7--exp of investors 8--subscriptions to prof. journals 9--tax preparation fee 10--debit card convenience fee to pay income tax 11--activities not for profit (hobbies) ```
38
Reimbursed Business Exp Are they deductible or not? (itemized or not) R2-27
All are deductible if included in gross income *only employee moving exp are adjustments to arrive at AGI
39
Unreimbursed Business Exp What exp are deductible? R2-27
- -travel, meals, lodging (overnight business travel) - SE deducts on Sch C - -transportation exp (100%) - --meals/entertainment (50%)
40
Unreimbursed Business Exp Travel, meals, lodging What is deductible? R2-27
All exp are deductible when: - -away from home overnight - -fam's exp are not deductible - -cannot be away from many months
41
Unreimbursed Business Exp Transportation Exp What is deductible? R2-28
--100% deductible Deductible if: - -not regular job site - -regular office second job - -out-of-town business Not deductible: - -home second job - -home regular office
42
Unreimbursed Business Exp Transportation Exp travel to/from non-regular job site Deductible or not? R2-28
100% deductible
43
Unreimbursed Business Exp Transportation Exp travel to/from regular office and second job Deductible or not? R2-28
100% deductible
44
Unreimbursed Business Exp Transportation Exp travel for out of town business Deductible or not? R2-28
100% deductible
45
Unreimbursed Business Exp Transportation Exp travel to/from home and second job Deductible or not? R2-28
not deductible
46
Unreimbursed Business Exp Transportation Exp travel to/from home and regular office Deductible or not? R2-28
not deductible
47
Unreimbursed Business Exp Meals/Entertainment What is deductible? How much? R2-28
--50% deductible --exp directly related to and associated with conducting business
48
Educational Expenses What can be deducted? R2-29
Job related ed. exp that: - -maintain or improve skills needed in trade - -meet express req. of individual's employer for retention of job i. e. CPE * don't confuse w/ ed. interest exp.
49
Uniforms What exp are deductible? R2-29
- -purchase - -cleaning - -repairing --must not be wearable when off job
50
Business Gifts How much is deductible? R2-29
--$25 per recipient per year
51
Business use of Home What is deductible? R2-29
The part of home only if used exclusively for business and is for the convenience of the taxpayer
52
Employment Agency Fee What is deductible? What is not? R2-29
Deductible: --agency fee for new job in the same profession Non-Deductible: - -1st job - -new profession
53
Expenses of Investors What exp are deductible? R2-29
- -safe deposit box rental fee - -investment advice - -investment newsletter
54
Subscription to Professional journals Deductible or not? R2-29
deductible
55
Tax Preparation Fee R2-29
legal fees and accounting fees for: - -tax return preparation - -tax planning
56
Debit Card Convenience Fee incurred to pay income tax When is it deductible? R2-29
deductible in year the fee was incurred
57
Activities Not Engaged for Profit (Hobbies) R2-30
Not Deductible Exception: - -deductions allowed in amount that gross income derived from activity exceeds deduction * no losses are allowed
58
Other Misc. Deductions What exp are they? R2-30
*not subject to 2% AGI test - -gambling losses - -Federal estate tax paid for decedent
59
Other Misc. Deductions Gambling losses How much is deductible? R2-30
gambling losses are deductible to the extent of winnings. *not subject to 2% of AGI test
60
Other Misc. Deductions Federal Estate Tax paid for decedent What is deductible? R2-30
estate tax paid bc of income received as a beneficiary of an estate

Regulation (13 decks)

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