Income Tax concepts Flashcards
What is the primary source of tax law?
The Internal Revenue Code
Dates for paying estimated taxes?
April 15 (1), June 15 (+2), September 15 (+3), January 15 (+4)
What should a taxpayer pay to avoid a penalty?
The LESSER of 90% of the current year’s tax liability or 100% of the prior year’s tax liability. (Or 110% if the taxpayer makes more than 150K.)
What is on Schedule A? (Adjustments FROM AGI)
SHRIMP CC
State and Local Taxes (limited to 10K annually)
Home Mortgage Interest
Real Estate Taxes (limited to 10K annually)
Investment interest expense
Medical, dental, and LLC (7.5% of AGI)
Personal property
Casualty/theft losses
Charitable gifts
How do you calculate a deductible loss? (real estate)
Deductible losses can only come from federally declared disasters.
First: Use the LESSER of basis or FMV
Second: Subtract any insurance coverage
Third: Subtract $100 (floor)
Fourth: Subtract 10% of AGI.
What are itemized miscellaneous deductions (personal exemptions)?
THERE ARE NO ITEMIZED MISCELLANEOUS DEDUCTIONS ALLOWED. ZERO.
Can you deduct home office expenses?
If you are a self-employed individual, you use the home area exclusively for business, the home office is used to conduct administrative or management activities, and is no other fixed location where these activities are conducted - yes.
The deduction for an office in a home cannot create a loss.
What is considered self employment income?
Net schedule C income
General partnership income (K-1 income)
Board of directors’ fees
Part-time earnings (1099)
NOT self employment:
Real estate income or rents paid
Distributive share of income
Wages from an S Corp
Distributions (K-1) from S Corp
How do you calculate self-employment tax?
Multiply self-employment income by 14.13% (.1413)
Does FICA tax stop?
Yes, after $147,000 earnings for EMPLOYEE.
What is the child tax credit?
2K per each qualifying child under age 17. Up to 1.4K is refundable.
What is the credit for child care and dependent expenses?
20% of either 3,000 (one kid) or 6,000 (two + kids)
How do you calculate gross profit percentage?
profit / total contract price.
What is Section 121?
For sale of residence (Section 121), $500,000 can be excluded from gross income for MFJ and $250,000 for single. To claim the exclusion, the taxpayer must have used the home as a residence for 2 out of the 5 year period before the sale.
Publicly traded partnerships cannot use gains or losses.
Publicly traded partnerships cannot use gains or losses.
Real estate loss?
Qualifying taxpayers may deduct up to 25K per year of net losses from real estate activity from their active or portfolio income. This deduction is phased out for taxpayers with AGIS between $100K and $150K on a $2 for $1 basis.
