i75 Chapter 1

Question 1

Deductions to arrive to AGI

Answer 1

S - Student costs including educator and loan interest
H - Health Insurance paid by self-employed - HSA
A - Alimony paid-on divorce agreements prior to 12/31/18
M - Moving expenses for members of the military
P - Penalty on early withdrawal of savings
O - One half of self-employment tax
O - Old Age / Retirement contributions IRA

Question 2

S: Educator Expenses to arrvie at AGI

Answer 2

K-12 teacher can deduct a maximim of $300 per year

Question 3

S: Student Loans Interest Deduction

Answer 3

Taxpayer can deduct up to $2,500/year in student loans.
Gradually lost (phase out) if AGI is above: S/HH $70K // MFJ $140K

Question 4

H: Health Insurance for Self Employed

Answer 4

Health insurance costs can be deducted if the taxpayer is self-employed and have a net profit for one year on Schedule C. Deductible portion includes what is paid for self, spouse, and children under 27 on Schedule 1.

Question 5

H: HSA

Answer 5

Taxpayers whose only health care coverage qualifies as a high deductible plan can put money into an HSA and receive a deduction in arriving at AGI

Question 6

H: HSA contributions made by ER

Answer 6

are excluded from EE income

Question 7

H: Self Employed Pension

Answer 7

Deductible limit of 25% of bottom line net on Schedule C

Question 8

Work Opportunity Credit

Answer 8

Business Credit for hiring certain target groups (i.e. veterans, LT unemployed).
40% of the first $6000 paid (max $2,400) paid per EE

Any work opportunity tax credit would result in a reduction to the amount of deduction for wages

Question 9

Credit for Family and Medical Leave

Answer 9

Business Credit for paying EE’s for family and medical leave for at least two weeks of annual paid leave.
credit is 12.5% of wages paid to EE’s who are on family leave if the ER is paying EE at least 50% of normal wage (max 25% if ER pays for 100% of EE wages during this time)

Question 10

Employee Zone Empowerment Credit

Answer 10

A second credit for hiring certain target individuals
Credit of 20% of the first $15,000 of wages paid to the new EE who is a resident of a designated empowerment zone (where they live) and performs substantially all services within the zone in the empowers trade or business.
Would result in a reduction to the amount deducted for wages

Question 11

Foreign Tax Credit

Answer 11

The percentage of worldwide income that comes from foreign sources is eligible for the foreign tax credit
Credit is to avoid double taxation. For US citizens, the foreign income has already been taxed once overseas in the foreign country
Excess foreign tax credit can be carried back one year and forward 10 years
(Foreign Source Income)/(Worldwide Income)×US Tax on Worldwide Income

Question 12

Incremental Research Credit

Answer 12

20% of qualified expenditures. Research must be conducted in the US
The credit does not apply to research after commercial production begins (i.e. testing new products)
No credit for market research, surveys, or social science research or routine data collection

Question 13

Rehabilitation Credit

Answer 13

20% credit for qualifying expenditures made to rehabilitate a certified historic structure
Once the building is placed in service after rehab, the credit is claimed each year for five years instead of claiming the full credit in one year
SL depreciation must be used on the building (not MACRS dep)