Individual Income Tax Flashcards
Qualified child
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Qualified child:
-Relationship:
+your children (incl. adopted & foster) and grandchildren
+your silblings and silblings’ children
-Age:
+ < 19 or <24 (if student) & younger than you/taxpayer
+any age (if totally disabled)
- Student: enrolled min 5 month (not required consecutive)
- Residency: Live w/txpayer > 1/2 year
- Support: Txpayer provide more than 1/2 support.
- Joint return: Dependent can’t file joint return.
Qualified relative
Must be met all four test
- Not a qualified child
- Residency: all year
+Except if the person is your blood related and in-laws including your parents , parent’s silblings
- Gross income test:
+Less than $4,050 (gross not net, i.e, gross rent not net rent which net of rent income and expenses)
+Tx exempt income i.e. SSB not included.
- Support: txpayer to provide more than 1/2.
Business like C corp’s casualty loss is subject to $100 floor like individual or not
Not
Julie, who is single, had the following items of income and deduction included on her 2016 Form 1040 income tax return:
Salary $40,000
Net capital loss deduction 3,000
Itemized deduction (all attributable to a personal casualty loss when a tornado destroyed her vacation home) 45,000
Personal exemption 4,000
What is the amount of Julie’s net operating loss for 2016?
Julie’s personal casualty loss of $45,000 incurred as a result of the tornado damage to her vacation home is allowed as a deduction in the computation of her NOL and is subtracted from her salary income of $40,000, to arrive at a NOL of $5,000. In the computation of a NOL, no deduction is allowed for personal and dependency exemptions, and no deduction is allowed for a net capital loss.
Which of the following is not included in determining the total support of a dependent?
Support includes food, clothing, FMV of lodging, medical, recreational, educational, and certain capital expenditures made on behalf of a dependent. Excluded from support are life insurance premiums, funeral expenses, nontaxable scholarships, and income and Social Security taxes paid from a dependent’s own income.
A husband and wife can file a joint return even if
The spouses have different tax years, provided that both spouses are alive at the end of the year.
The spouses have different accounting methods.
Either spouse was a nonresident alien at any time during the tax year, provided that at least one spouse makes the proper election.
They were divorced before the end of the tax year.
The spouses have different accounting methods.
Which of the following statements about the child and dependent care credit is correct?
The credit is nonrefundable.
The child must be under the age of 18 years.
The child must be a direct descendant of the taxpayer.
The maximum credit is $600.
For every $2,000 over $15,000, reduce 1%
The child and dependent care credit is a nonrefundable credit that may vary from 20% to 35% of the amount paid for qualifying household and dependent care expenses incurred to enable a taxpayer to be gainfully employed or look for work. Expenses must be incurred on behalf of a qualifying individual. A qualifying individual includes a taxpayer’s child (e.g., taxpayer’s child, stepchild, sibling, stepsibling, or descendant of any of these) under age 13, as well as a dependent or spouse who is physically or mentally incapable of self‐care. Since the maximum amount of qualifying expenses is limited to $3,000 for one, or $6,000 for two or more qualifying individuals, the maximum credit would be 35% × $3,000 = $1,050 for one qualifying individual, and 35% × $6,000 = $2,100 for two or more qualifying individuals.Min is 20% x 3,000= $600.
Home and american opportunity tax credit, what is max credit? applied to what type of education? what is the AGI limit?
The credit is computed as 100% of the first $2,000 and 25% of the next $2,000 of qualified educational expenses, for a total of $2,500. This credit does not begin phasing out in 2015 for married filing joint returns until AGI reaches $160,000. The credit applies only to post‐secondary expenses so the tuition for Kaitlin does not qualify.
Which of the following disqualifies an individual from the earned income credit?
The taxpayer’s qualifying child is a 17‐year‐old grandchild.
The taxpayer has earned income of $5,000.
The taxpayer’s five‐year‐old child lived in the taxpayer’s home for only eight months.
The taxpayer has a filing status of married filing separately.
The earned income credit is a refundable tax credit for eligible low‐income taxpayers. To be eligible, an individual must have earned income and generally must maintain a household for more than half the year for a qualifying child. A qualifying child includes the taxpayer’s child or grandchild who lives with the taxpayer for more than half of the taxable year, and is under age 19, or a full‐time student under age 24, or permanently or totally disabled. The earned income credit is not available to married taxpayers filing separately.
Refundable tax credit
Certain tax credits can result in a refund, even if the individual had no income tax liability. Tax credits resulting in a refund are
1. credits for earned income tax withheld, 2. excess social security tax withheld, 3. excise tax for certain nontaxable uses of fuels and light weight diesel vehicles.
Adoption credit:
refundable or nonrefundable
- Nonrefundable
- Max credit $13,400
- Child age <18 or disable
- Qualified expenses accounted when it incurred during, before and after finalizing the adoption, credit will be claimed as the adoption become finalized.
Child tax credit
- Age < 17
- $1000 per child
- Phase out AGI $110,000 - $130,000
Life time learning credit vs Amercan opportunity credit
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