Income Tax, Fundamentals And Calculations: deductions for adjusted gross income Flashcards
What are the two cases in which the taxpayer may deduct some expenses of a trade or business from gross income in arriving at AGI?
Expenses are incurred and carrying on a trade business
Expenses are incurred in connection with property held for the production of rents or royalties
Are unreimbursed business expenses of an employee deductible
No
Self-employed individuals are allowed a deduction for AGI of self-employment tax paid for what amounts?
6.2% of OASDI up to the Social Security taxable wage base ($168,600 for 2024) and 1.45% of Medicare (no earnings limit )for a total of 7.65%
How is alimony treated when paid by either ex-spouse?
Alimony paid is a deduction for AGI but only for divorces finalized on or before December 31 of 2018. Spouse who receives alimony must include the alimony as taxable income.
Divorce is finalized on January 1, 2019 and beyond alimony will no longer be deductible by the payer. Alimony will no longer be taxable to the recipient.
How much can a taxpayer contribute to an IRA?
$7000 increased to $8000 for those age 50 or older and may be deductible if below her in the phase out range
$77,000 - $87,000 single
$123,000 - $143,000 MFJ
Does another spouse have to be working to be able to contribute to an IRA?
No
If only one spouse is an active participant in a retirement plan at work the non-participating spouse will have the deduction phased out at what AGI level?
$230,000 - $240,000
The ability to make a contribution to a Roth IRA phases out at AGI levels as follows
$230,000 -$240,000 MFJ
$146,000 - $161,000 single
Are forfeited interest on withdrawals from CDs deductible for AGI?
Yes
Losses are deductible against the taxpayers ordinary income up to what amount annually and how much can you carry forward
$3000 with an unlimited carry forward amount
What happens to losses that are unused after filing a taxpayers final federal income tax return
May not be used by the estate or beneficiary they are lost
How can corporations use capital losses?
Only as an offset against capital gains
Losses in excess of years, capital gains may be carried forward for five years or carried back to each of the proceeding three tax years treated as a short term capital loss for the year in which it is carried forward or back
Remaining losses that cannot be fully utilized in the carryover periods are not deductible (three years back and five years forward)
Self-employed taxpayers and wage earners who are more than 2% shareholders of an S corporation can take What amount for deductions for amounts paid for health insurance for taxpayers spouses and dependents?
100%
If employer makes the contribution to an archer MSA, what must the employee include in income?
No, it is excluded
What are the rules for archer medical savings accounts MSA?
Earnings generated not taxable
Distributions used to pay medical expenses are not taxable
Not used for medical expenses, subject to a 20% penalty tax and are taxable does not apply after age 65 or up upon death or disability
Can you have both in archer medical savings account and a health savings account HSA?
Yes, but contributions to the MSA will reduce contribution limits to the HSA plan
Can you roll over a pre-existing archer medical Savings account MSA into an health savings account HSA plan?
Yes
Health savings accounts, HSA plans allow qualifying dividends with high deductible health insurance plans to make tax deductible cash contributions above the line deductions what are the limits for 2024?
$4150 for single
$8300 for family
What are the rules for health savings accounts HSA?
Can be used to reimburse the individual tax-free for qualifying medical expenses
Subject to income tax and a 20% penalty if not use for qualifying medical expenses does not apply to withdrawals after age 65
Earnings generated by the plan are not taxable
Employer makes the contributions excluded from the employees income
Interest paid on qualified educational loans are deductible in arriving at AGI proceeds must have been used for what higher education needs?
Tuition, fees, room board, and other necessary expenses, including transportation
What is the maximum allowable annual deduction for educational interest and what are they phased out at?MAGI levels?
$80,000 - $95,000 Single
$165,000 - $195,000 Married
$2500
AGI serves as the basis for calculating percentage limitations on certain itemized deductions, such as
Charitable 50% of AGI, depending on the type of charity and type of contribution
Medical 7.5% of AGI
Casualty losses for federally declared disasters must be greater than 10% of AGI
Serves as a benchmark for limiting passive rental real estate losses
