Individual Flashcards
For AGI Deductions
MISTER JAMTS
M - Medical Savings Accounts
I - Interest and Penalties on Early Withdrawl
*S - Self Employment Insurance - 100% deductible
*T - Self Employment Tax - 50% deductible
E - Education (rules)
*R - Retirement Contributions
J - Jury Duty *A - Alimony *M - Moving Expenses T - Tuition and Fees S - Student Loan Interest Expense
Deductions:
Itemized Deductions
(MCC MIT)
M - Medical > 10% AGI
C - Casualty and Theft
lower of change in value or basis if totally gone
less $100 less 10% AGI
C - charity (rules)
M - Miscellaneous Itemized > 2% AGI
(BEST LETS Eat & Fees)
I - Interest on Home Loan
HIME
T - Taxes
(FRIPE TIPS)
Deductions:
Itemized Deductions
Miscellaneous Itemized > 2% AGI
(BEST LETS Eat & Fees)
B - Business expenses (unreimbursed)
E - Education & Employment Agency Fees
S - Subscription Fees & Dues
T - Tax Preparation Fees
L - Lodging (business travel)
E - Entertainment Expense - 50% deductible
T - Travel Expenses
Eat - 50% business meals
Fees - Alimony collection, Appraisal, Investment publications, IRA custodial Fees
Deductions:
Itemized Deductions
Miscellaneous Itemized 100% deductible
Gambling losses to extent of gains
Investment Interest Expense > Investment Income
Medical Expense > 10% AGI
Casualty & Theft
lower of change in value or basis totally gone
less $100 less 10% AGI
Deductions:
Itemized Deductions
Interest on Home Loan
HIME
Home equity loan = $100k MFJ $50 Single
Interest and Points
Mortgage loans <= $1M MFJ $500 Single
Excludes personal consumer debt
• Acquisition Indebtedness:
Interest on up to $1M (MFJ) deductible for:
buying/constructing/improving, debt secured by
home, points immediately (refinancing over period
of loan)
• Home Equity Indebtedness:
Interest on up to lesser of: $100K (MFJ) or (FMV of home – acquisition indebtedness)
Any reason except buying securities: credit card
debt, vacation, etc.
• Mortgage Insurance Premiums
Deductions:
Itemized Deductions
Taxes
FRIPE TIPS
F - Foreign Taxes Paid
R - Real Estate Taxes Paid
I - State Income taxes paid
P - Personal Property Taxes
E - Excludes TIPS
T - Tax Assessments
I - Interest
P - Penalties
S - Special AssessmentsAMT
Overview
Regular Taxable Income (TI) \+/- Adjustments (+/-PANIC +TIME) \+ 3 Preferences (PPP) = AMTI - Exemption (reduce by 25%(AMTI> Threshold)) = AMT Base X Tax (will give % in question) = Tentative AMT - Tax Credits = TMT - Regular Income Tax = AMT
AMT
Adjustments
(PANIC TIMME)
(+/-) \+ P - Passive Activity Losses - Accelerated Depreciation \+ NOL of individual - Installment Method - Contracts (% completion vs completed)
(+)
+ Taxes (foreign, state, local, personal)
+ Interest on Home Equity Loans not allowed
+ Medical > 10% AGI (old)
+ Misc 2%AGI floor
+ Excludes personal exemption & standard deduction
AMT
Preferences
(PPP)
(+)
Private Activity Bond Interest Income
Percentage depletion > Adjusted basis
Pre-1987 Accelerated Depreciation
AMT
Credits
(FACCE)
Foreign Tax Credit Adoption Credit Child Tax Credit Contributions to Retirement Plans Earned Income Credit
Dependency Exemptions
Qualifying Child
CARES
• Close Relative
• Age Limit (19 or 24 if full time student)
• Residency & Filing Requirements (same house ½
year, no joint return)
• Eliminate Gross Income Test
• Support Test Changes (child must provide less
than ½ own support)
Dependency Exemptions
Qualifying Relative
SUPORT
• Support Test (taxpayer supplied ½ support)
• Under Exemption Amount of GI ($4,050 for 2016)
• Precludes filing a joint return
• Only citizens of US, Mexico, or Canada
• Relative OR
• Taxpayer lives with individual non-relative for
whole year
Other Items
Federal & State Taxes
• Interest on either is included in gross income
• Federal tax refunds are not included in income
(because fed tax never deductible)
• State tax refund not included as income unless
itemized deductions were taken in prior year
• State and local taxes are an itemized deduction
• Assessments are not deductible
• (questions will give you laundry list of similar
language and which is taxable?)
Other Items
Insurance
• GR: Premiums deductible to Corp (casualty, health,
accident, and life) and proceeds nontaxable to
individual
• If keyman lifeinsurance and corp is beneficiary,
premiums not deductible to corp and proceeds
nontaxable
• Individuals may deduct health insurance premiums
as part of medical itemized deduction (10% AGI)
• Life insurance premiums paid by employer over
$50k divide by $1k multiply by rate
• Exchange/sale of life insurance policy for cash
treated like sale and proceeds taxable to extent
greater than amount paid + insurance premiums
paid
• ‘Dividends’ on life insurance are not true taxable
dividends
• If proceeds distributed over time, there will be an
interest component taxable Schedule B Interest &
Dividends
• Estate = tax on transfer of wealth – life insurance
policy included in assets of estate (estate is taxed
on the proceeds paid to the beneficiary)
Other Items
Passive Activity Losses
• Heavily tested and weird (sorting hat)
• K-1 goes on Schedule E: any expenses for rental
• Only to extent of passive gains, limit $25k if less
than $150
• Active participating in partnership = active loss =
net against active income
• Nonrefundable deposit held in separate account
• Ex) Rent to cover expenses then depreciation puts
you into loss. Rules are structured to prevent this.
• All Rental Activity = Passive Activity (Unless in
business of renting houses ‘real estate
professional’ more than 50% time)
• Rental net gain = taxable
• Ex) Rental net loss = 5 gain prop1 + 5 gain prop2 +
20 Loss prop3= 10 net loss not deducted until net
passive activity gains’
• Net passive losses carried forward indefinitely
• Weird things
Keep running at slight loss, when you sell, passive
losses are released against gain on sale (loss is
kept on a per property basis when you sell)
Mom & Pop Exception: (Heavily tested) If you
make under $100k AGI, can deduct $25k of
passive loss against active income. The $25k is
reduced by 50% if AGI up to $150K.
Passive Activity Suspended Losses
(loss on X)/(X loss + y loss) x Total XYZ Net loss
