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Regulation > Deductions from AGI (below line) > Flashcards

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
Q

Charitable Contributions

What contribution is deductible?

R2-23

A

–items given to organizations

Not deductible:

  • -gifts- items given to individuals
  • -political contributions
  • -services
26
Q

Charitable Contributions

What amount can be itemized?

R2-23

A

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
Q

Charitable Contributions

How much can be deducted if not itemizing?

R2-25

A

Charitable contributions cannot be deducted if not itemizing

28
Q

Charitable Contributions

When can it be itemized?

R2-25

A
  • -when paid (cash or check)

- -when charged (credit card)

29
Q

Charitable Contributions

Can you itemize services given to an organization?

R2-25

A

–services are not deductible

30
Q

Charitable Contributions

Excess contributions can be CF,CB, or lost?

R2-25

A
  • -CF - 5 years

- -CF in FIFO basis

31
Q

Interest Expense
Home Mortgage Interest
(“H” in HIPPE mnemonic)

What is deductible? How much?

R2-21

A

–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
Q

Interest Expense
Investment Interest Expense
(“I” in HIPPE mnemonic)

What is deductible?

R2-22

A

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
Q

Personal Interest
(“P” in HIPPE mnemonic)

Is it deductible or not?

R2-23

A

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
Q

Prepaid Interest
(“P” in HIPPE mnemonic)

Is it deductible or not?

R2-23

A
  • -deducted when incurred and paid

- -allocate over the period of the loan

35
Q

Education Loan Interest
(“E” in HIPPE mnemonic)

Is it deductible or not?

R2-23

A

Education Loan interest is not itemized

  • it is an adjustment to arrive at AGI
  • -max $2,500
  • -excess not deductible
36
Q

Casualty and Theft Losses

How much is deductible from AGI?

R2-26

A

–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
Q

Miscellaneous Itemized Deductions

What are they?

R2-27

A

–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
Q

Reimbursed Business Exp

Are they deductible or not?
(itemized or not)

R2-27

A

All are deductible if included in gross income

*only employee moving exp are adjustments to arrive at AGI

39
Q

Unreimbursed Business Exp

What exp are deductible?

R2-27

A
  • -travel, meals, lodging (overnight business travel)
    • SE deducts on Sch C
  • -transportation exp (100%)
  • –meals/entertainment (50%)
40
Q

Unreimbursed Business Exp
Travel, meals, lodging

What is deductible?

R2-27

A

All exp are deductible when:

  • -away from home overnight
  • -fam’s exp are not deductible
  • -cannot be away from many months
41
Q

Unreimbursed Business Exp
Transportation Exp

What is deductible?

R2-28

A

–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
Q

Unreimbursed Business Exp
Transportation Exp

travel to/from non-regular job site
Deductible or not?

R2-28

A

100% deductible

43
Q

Unreimbursed Business Exp
Transportation Exp

travel to/from regular office and second job
Deductible or not?

R2-28

A

100% deductible

44
Q

Unreimbursed Business Exp
Transportation Exp

travel for out of town business
Deductible or not?

R2-28

A

100% deductible

45
Q

Unreimbursed Business Exp
Transportation Exp

travel to/from home and second job
Deductible or not?

R2-28

A

not deductible

46
Q

Unreimbursed Business Exp
Transportation Exp

travel to/from home and regular office
Deductible or not?

R2-28

A

not deductible

47
Q

Unreimbursed Business Exp
Meals/Entertainment

What is deductible? How much?

R2-28

A

–50% deductible

–exp directly related to and associated with conducting business

48
Q

Educational Expenses

What can be deducted?

R2-29

A

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
Q

Uniforms

What exp are deductible?

R2-29

A
  • -purchase
  • -cleaning
  • -repairing

–must not be wearable when off job

50
Q

Business Gifts

How much is deductible?

R2-29

A

–$25 per recipient per year

51
Q

Business use of Home

What is deductible?

R2-29

A

The part of home
only if used exclusively for business
and is for the convenience of the taxpayer

52
Q

Employment Agency Fee

What is deductible? What is not?

R2-29

A

Deductible:
–agency fee for new job in the same profession

Non-Deductible:

  • -1st job
  • -new profession
53
Q

Expenses of Investors

What exp are deductible?

R2-29

A
  • -safe deposit box rental fee
  • -investment advice
  • -investment newsletter
54
Q

Subscription to Professional journals

Deductible or not?

R2-29

A

deductible

55
Q

Tax Preparation Fee

R2-29

A

legal fees and accounting fees for:

  • -tax return preparation
  • -tax planning
56
Q

Debit Card Convenience Fee incurred to pay income tax

When is it deductible?

R2-29

A

deductible in year the fee was incurred

57
Q

Activities Not Engaged for Profit
(Hobbies)

R2-30

A

Not Deductible

Exception:

  • -deductions allowed in amount that gross income derived from activity exceeds deduction
  • no losses are allowed
58
Q

Other Misc. Deductions

What exp are they?

R2-30

A

*not subject to 2% AGI test

  • -gambling losses
  • -Federal estate tax paid for decedent
59
Q

Other Misc. Deductions
Gambling losses

How much is deductible?

R2-30

A

gambling losses are deductible to the extent of winnings.

*not subject to 2% of AGI test

60
Q

Other Misc. Deductions
Federal Estate Tax paid for decedent

What is deductible?

R2-30

A

estate tax paid bc of income received as a beneficiary of an estate

Regulation (13 decks)

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