For (To) AGI Flashcards
Interest (Student loan Interest)
1) $2500/per year on qualified education loan. 2) phase out applies 3) Applied to entire repayment period
Expenses allowed to be deducted
Tuition, fees, room, board, and related expenses
What is a qualified education loan?
any debt incurred to pay a higher education expenses and must relate to a period when student was enrolled on at least half-time basis
Not qualified expenses
debt owed to related party
Not allowed as deduction
If individual is claimed as a dependent on another taxpayer’s return
Self-employed individuals can deduct
1) 50% of the tax return (7.65%) which are 6.2% of FICA & 1.45 for Medicare. 2) 100% of premiums for medical insurance for the individual, spouse, and dependents
Limitation regarding deductions for self-employed
1) deduction cannot exceed the individual’s net earnings. 2) No deduction is allowed if the self-employed individual or spourse is eligible to participate in an employer’s subsidized health plan. 3) Any medical Insurance premiums not deductible under the above rules are deductible an itimized deduction from AGI
Moving Expenses - for employee
1) new job must be at least 50 miles further from old home, each way. 2) Direct cost of moving you and your stuff. 3) Must work at least 39 weeks (9 mos).
Example of Deductible moving expenses include
1) cost of moving household goods and personal effects from the old to the new residence. 2) cost of traveling including lodging from the old residence to the new residence. 3) actual auto expenses or standard rate provided by the IRS. NOTE: if moving expenses were paid by the employee and then reimbursed by the employers, as long as no moving expenses deduction was taken, income shouldn’t be included to AGI
Example of non-deductible moving expenses
1) cost of meals. 2) house-hunting trips. 3) temporary lodging in the general location of the new work site. 4) expenses incurred in selling an old house or buying a new house. 5) expenses in settling a lease on an old residence or acquiring a lease on the new residence.
Business Expenses (Schedule C - 1099)
1) all cost of running the business. 2) all taxes paid by the business. 3) Bad debts = recognizes only direct write off method. 4) Uniform Capitalization Rule (UNiCAP Sec-263A) requires that certain indirect costs be capitalized to inventory produeced or held for sale. 5) Interest paid. 6) Gift to customers up to $25 per recipient per year. 7) 50% meals and entairtainment. 8) 100% travel expenses. 9) $4 per promotional item
Business Expenses - interest paid in advance
not deductible when paid, even by a cash basis taxpayer
If no profit in 3 of 5 years, loss not deductible
this loss is considered hobby loss. Net income (other income in line # 21 of Form 1040. Expenses = Schedule A (misc. 2%)
Business gift - Business Expense
1) limited to $25. 2) advertising & promotional = $4. 3) personal property of $400 awarded as employee achievement award for length of service or safety achievement. 4) personal property $1600 awarded for length of service or safety achievement under qualified plan
Rental, Royalty & Flow through Entities (Shedule E)
This is passive activity which means as any business venture in w/c the taxpayer doesn’t materially participate. All limited partnership interests. All rental activity.
