Indiv. Tax, Income Flashcards
5 Qualifications for Qualifying Widower?
1 - Taxpayer’s spouse died in one of prev. two years, not remarried
2- Taxpayer has child who can be claimed as dependent
3- Child has lived in home all of tax year
4- Taxpayer paid over half the cost of keeping home for child
5- Taxpayer could have filed joint return the year the spouse died
How long can you file married filing jointly after death?
Only in that tax year.
When can a spouse be considered an exemption on a tax return?
When they have BOTH 1- no gross income and 2- NOT the dependent of another tax payer
Qualifying Relative Test - SUPORT!
S- support over 50% $
U- under exemption amount was made – less than $4K
P- precludes a joint return, unless tax paid wa $0
O- only CITIZENS of US and RESIDENTS of North America
R- relative of some kind. child, grandchild, parent, grandparent, aunt uncle, neice nephew, stepchildren, in-laws
OR!!
T- Taxpayer LIVES with individual (IF NONRELATIVE) for the entire year
Qualifying Child Test - CARES!
C- child of theirs. son, daughter, stephson, stepdaughter, brother, sister, can’t be OLDER than them.
A- Age limit – under 19, or under 24 if full-time student!
R- Residency. In same principal abode as parents (taxpayers) for more than half the year. Also no joints unless only for refund claim.
E- eliminate gross income test. in this case, does not matter the money they make.
S- support test is gone. no more 50%
What conditions preclude taking a net loss on rental property?
Personal use for more than 14 days that year.
What types of interest income are taxable?
IRS interest, and of course investment interests.
NOT TAXABLE – int. on state pr local government BONDS or OBLIGATIONS.
NOT TAXABLE - Bonds of US possessions EG Guam or Puerto Rico.
What are the rules about including Social Security Benefits to Gross Income?
It’s a “Maybe,” and there are 5 levels depending on provisional income: (AGI + Tax-exempt interest + 50% SS Benefit)
1- Low Income. NO SS benefits taxable. (Indiv below $25K / MFJ below $32K)
2- Lower-Mid Income: Less than 50% SS Benefits taxable.
3- Middle Income - 50% Taxable (Indiv. above $25K / MFJ above $32K)
4- Upper-Mid Income: Between 50% and 85% of SS Benefits taxable.
5- Upper Income: 85% of SS Benefits taxable (Indiv. above $34K / MFJ above $44K.)
AGI elements - Adjustments to Arrive at AGI
1 - IRA
2- Student Loan Int. Exp.
3- HSA’s taken
4- Moving Expenses!! (The qualified ones)
5- 1/2 self-empl. FICA
6- self-empl. insurance
7- self-empl. retirement
8- Int. Withdraw Penalties!! (Eg interest penalties assessed for withdrawing early)
9- Alimony Paid
10- Attorney fees paid in certain discrimination and whistle-blowing cases
11- Domestic Production Activities Deduction
(Prev. to tax year 2015 - educator expenses, and tuition and fee deductions)
note – Net Earnings are what happen BEFORE AGI
MAGI elements - arriving at MAGI
MAGI is then calculated after finalizing the AGI number. To calculate MAGI, the taxpayer adds back certain deductions to AGI, many of which are rare and not realized by individuals. Therefore, it’s fairly uncommon to have a MAGI that differs greatly from an AGI. The Internal Revenue Service (IRS) explains that deductions added back to calculate MAGI include things such as student loan interest, tuition, rental loss and IRA contributions.
The MAGI then dictates the use of premium tax credits and retirement plans. For example, eligibility for premium tax credits occurs when an individual’s MAGI is less than 400% of the federal poverty line.
Read more: Modified Adjusted Gross Income (MAGI) Definition | Investopedia http://www.investopedia.com/terms/m/magi.asp#ixzz47seswbMS
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Are cash equivalents received counted as taxable income?
Yes
Does prepaid rent count as rental income, even for accrual basis?
Yes
What goes into GROSS (and taxable) income?
Essentially: Anything except what may be excluded via tax code.
Determined by amount of cash, property (FMV - but not prop. settlements in divorce), and services (FMV) Obtained.
ALSO – FMV of prizes and awards, unless candidate was unaware of nomination awarded through charitable or gov’t org.
What are some examples of Incomes that are not considered Taxable OR GROSS?
Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:
•Child support payments received;
•Gifts, bequests and inheritances received;
•Welfare benefits received;
•Damage awards for physical injury or sickness received;
•Cash rebates from a dealer or manufacturer for an item you buy; and
•Reimbursements for qualified adoption expenses.
-Scholarships & Academic Fellowships!
(IRS.gov)
Netting Capital Gains and Losses for Tax Purposes
Net Short-Term Capital Gain: Ordinary income (for both indivs. and corps.)
Net Short-Term Capital Loss: Deductible to AGI for indivs. at $3000 per year, indefinite carry-forward for future netting.. For corps, no current deduction, but can bring back 3 yrs and forward 5 to offset gains
Net Long-Term Capital Gain: Taxed at minimum 15%.; for corps, Ordinary Income
Net Long-Term Capital Loss: Same as LT Cap Gain for INDIVS ($3000 deductible from AGI with indefinite carry-forward, though short-term losses must net in as well) and same process for Corps (back 3, forward 5)
