Income Tax - Supplemental

Question 1

Gross Income Inclusions

Answer 1

• Taxable Interest
• Ordinary Dividends
• Business Income/Loss
• Capital Gains/Losses
• Alimony Received (Pre-2019 Divorce)
• IRA Distributions
• Pensions/Annuities/Punitive Damage Payments
• Real Estate Income
• Unemployment Income
• Taxable Social Security Payments

Question 2

Installment Sales
(Calculation of Gain)

Answer 2

Profit / Total Contract Price = Gross Profit %

Installment Paid x Gross Profit % = Capital Gain (Long Term)

Question 3

Charitable Bargain Sale
(Adjusted Basis & Taxable Gain)

Answer 3

( Sale Price / FMV ) x Basis = Adjusted Basis

Sale Price - Adjusted Basis = Taxable Gain

Question 4

Child Tax Credit

Answer 4

• Partially Refundable Credit ($1,600)
• $2,000 for each child under age 17
• Phase out at $200K (S) & $400K (MFJ)

Question 5

Credit for Child and Dependent Care Expenses

Answer 5

• Until Age 13
• Non-Refundable
• Limit of $3,000 (1 child) or $6,000 (2+ children)
• Calculation: 20% of Allowable Expense on Exam

Question 6

Real Estate Activity Losses Deduction

Answer 6

• Active Participation
• $25,000 against portfolio income (Sched E)
• Phase out at $100-$150K
  
  • $1 credit reduction for every $2 above $100K

Question 7

Credit for Other Dependents

Answer 7

• AKA “Family Credit”
• $500 (Non-refundable)
• Typically elder parent, they cannot have >$4,500 of income

Question 8

Investment Income - What qualifies?

Answer 8

Interest, Dividends, Royalties, and Short-Term Gains.

LTCG and Qualified Dividends aren’t included.

Question 9

Where are expenses of Household Employees filed on?

Answer 9

Schedule H

Question 10

What is a deduction for AGI?

Answer 10

Above the Line Deduction (Adjustment)

Question 11

What is a deduction from AGI?

Answer 11

Below the Line Deduction (Standard/Itemized)

Question 12

QBI Deduction - Which businesses qualify?

Answer 12

Pass-Through Entities (Sole Proprietorship, S Corporations, LLCs, Partnerships)

NOT Service-Related Businesses (medical/law, financial advisors, and accounting)

Question 13

QBI Deduction - What’s the AGI phaseout (2023) and what happens?

Answer 13

The AGI phaseout for QBI deduction is $364,200, and is thus limited to 50% of W-2 Wages.

Question 14

Retirement Savings Contributions Credit & Phase-Out (2023)

Answer 14

Based on IRA, Retirement Plan, or ABLE contributions.

$73,000 (MFJ)
$36,500 (Single)

Question 15

Which education tax credit can you use if you are a felon?

Answer 15

Lifetime Learning Credit

NOT American Opportunity Tax Credit

Question 16

When does a charitable deduction lose its carryforward?

Answer 16

In the 7th year.