Income Tax Flashcards
Personal Exemptions
ZERO personal Exemptions allowed.
Self Employment Tax Calculation and Short Cut
Total Self Employed Income
Subtract 7.65%
Multiply Remainder 15.3%
Total Self-Employment Income x .1413
=______ (Round UP)
Total Self-Employed income Includes:
- K-1General Partnership
- Net Schedule C income
-1099 income
- Board of Director Fees
Child Care Tax Credit
Credit is a percentage of expenses for children going to day care
Limited to $3000 per Child or $6000 for two or more children. Multiply by 20%
Child Tax Credit
$2000 per Child under 17 is refundable tax credit
MAGI over $400,000 Joint and $200,000 Single
$1700 per child is refundable tax credit
Tax Deduction Vs Credit
Deduction:
- Worth More to High income Earners
= Tax Credit/Tax Bracket
Credit:
- Worth more to low income Earners
= Tax Deduction x Tax Bracket
Alimony Vs Child Support
Alimony is taxable to the recipient and deductuble to the payor if divorced before 2018
Child Support is not taxable nor deductible
Child Standard Deduction
Greater of Unearned income $1,300 or Earned Income plus $450
Standard Deduction
&
Itemized Deduction
Single: $14,600
MFJ: $29,200
Itemized: $0, Eliminated from 2018-2025
Cash accounting method
Method to use if corp earns less than $29 million in revenues
Accrual Method
Eligible:
over $29 million in revenue or 3 YRs average of $25 mill in Revenue, Large Department Stores (Maintains inventory)
Matches revenue with expenses in the year they incur the liability
Installment Sale
Allows capital gains to be realized over the life of the note instead of the year of the sale
EX. You buy land for $100,000 Sell it for $1,000,000 and buyer pays you $100,000 per year for 10 Yrs
Current year capital Recognized?
1) 900,000 Profit / 1,000,000 = 90%
2) 100,000 x 90% = $90,000 Capital Recognized
Net Operating Loss
Corporation can utilize losses from prior years to offset current year income
Losses will be claimed on the owners 1040
Can be deducted for the following year. Unlimited Carryforward
Carry Back is Prohibited
Personal Service Corps (PSC)
Closely Held Corp owned by Certain individuals. Any income retained by PSC will be taxed at 21% Flat
Eligible Businesses HALE
H: Health (Doctors, Dentist, Etc.)
A: Accounting, Actors, Architectural
L Law
E Engineering
S Corp
Advantages
- Limited Liability
- Limited losses up to basis
- Basis equals cash + Direct loans
- The ability of an owner to take excessive compensation and not have it classified as dividends
Conduit Entities Tax
Pass Through entities.
Dividends that are distributed are not double taxed
Ex. S. Corp, LLCs, Sole Proprietorship
