Income Taxes Flashcards
Child and dependency care credit
Applies to expenses of $3,000 per child or $6,000 for two children.
Based on AGI, the maximum credit is 20% of total care costs ($6K max) for two children x 20% = $1,200.
Dependent under 13
Spouse / dependent w/ handicap
Five dependency tests
1) gross income
2) support
3) member of household or family member
4) citizenship or residency (U.S., Canada or Mexico)
5) joint filing test
Standard deduction for kiddie tax
Greater of $1,100 or earned income plus $350
Formula for alimony recapture
R3 = P1 + P2 - 2P3 - $37,500
American Opportunity Tax Credit
100% of the first $2,000 of expenses and 25% of the next $2,000
Formula for gifted appreciates property with gift tax paid
Donor’s basis + (net appreciation / taxable gift) x gift tax paid
When to tax social security benefits
Based on MAGI (AGI + exempt income - muni bonds, foreign income)
1st hurdle - MFJ - $32,000 / others - $25,000
2nd hurdle - MFJ - $44,000 / others - $34,000
Deductible mortgage interest
Below the line -
Deduct mortgage interest on up to $1,000,000 of indebtedness - before 12/15/2017
Deduct “ $750,000 of indebtedness - after 12/15/2017
Charitable deduction for LTCG property (intangible - stocks, bonds; real property; tangible personalty (related use)
FMV - 30%
Basis - 50%
Child tax credit
$2,000 per child under 17
$1,400 refundable
AMT adjustments
- accelerated depreciation
- standard deduction (if itemized not used)
- taxes (state, local, property)
- ISOs (bargain element)
AMT preference
- percentage depletion
- intangible drilling costs
- interest on private activity bonds
Requirements for child and dependent care Credit
Dependent under 13 or spouse / dependent with a handicap
Passive activity definition
No material participation Rental activities (except real estate dealers)
