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
Schedules
Form 1040 Schedule A - Itemized Deductions Schedule B - Interest & Dividends Schedule C - Profit/Loss from Business Schedule D - Capital Gains/Losses Schedule E - Supplemental Income/Loss Schedule F - Farming Income Schedule SE - Self Employment Income
Charity
• Can include cash or property, but not services.
• Use lesser of basis or FMV
• Maximum allowable deduction: Overall 50% AGI
o Cash = Up to 50% AGI
o General Property = lesser of basis or FMV
o Up to 30% AGI for gifts of LTCG property (property you should have sold)
o Additionally, total charity deduction cannot exceed 50% for one year
• Another 50% AGI limit if donated to: church, educational institution, hospitals and medical schools, benefit college, federal/state/local gov, normally gov funded institutions.
• Carryforward 5 years.
• Sometimes test carryforward from prior years.
Investment Interest Expense
- Include: interest & dividends, rents, royalties, net LT and ST capital gains.
- Exclude: interest expense use to buy tax free bonds
- Exclude: passive activity or real estate activity
- Carried forward indefinitely
Child Tax Credit
o $3,000 ($600 min) for one, $6,000 for 2+ o Under 13 or disabled o Both taxpayers must work o Max 35% AGI $15k or less o Min 20% AGI $43k or more
Credit for the Elderly
o 15% eligible income
o $5k single or only one qualified spouse ($7,500 if two qualified)
o Eligible income reduced by any SS or pensions, and ½ income over $10k MFJ $5k Single
Education Credits
American Opportunity Credit
Up to $2,500 per student
Phaseout AGI > $80 single
Undergrad
Lifetime Learning Credit
Max $2k per household per year
Any higher education
Phaseout AGI > $53k
Qualified Tuition ProgramRetirement Savings Contribution Credit
o At least 18, not student, not dependent
o No carryover
Foreign Tax Credit
o Lesser of foreign taxes paid or (TI All/(TI + Exemptions))X US Tax
o Back 1 forward 10
Adoption Credit
o $13,000 per child
o Not medical expenses
Refundable Credits
- Child tax credit
- Earned Income Credit
- Withholding Taxes
- Excess Social Security
- American Opportunity Credit
Casualty Loss
• Use lesser of decline in value (old FMV – new FMV) or Adjusted basis.
Less $100
Less 10% AGI
Gross Income
Form 1040
Wages
State Tax Refund
Alimony Received
IRA Income
Pension and Annuity
Unemployment
Social Security
Other Income
Jury Duty Pay
Schedule B - Interest and Dividends
Interest
Dividends
Schedule C - Business Income
Business Income
Schedule D - Capital Gains/Losses
Capital Gain/Loss
Schedule E - Supplemental Income/Loss
Rental Income/Loss
K-1 Income/Loss
