Individual Taxation Flashcards
Taxable today
No benefit tomorrow
Deductible today
Taxable tomorrow
Traditional ira
Contributions are deductible
Unless ind actively participates in another plan- like at work
Agi exceeds threshold
Roth IRA
Not deductible but grows tax free
Withdrawals before 59.5 results in penalties 10%
Apart from state and fed tax
Unless medical, educational, first time home …
Educations saving
Put up to 2k?
Whatever it earns is tax free for education . Have to use it before age 30 or can be passed to another member.
529 plan
For children, the accumulated won’t be taxed as long as used for qualified expenses
Grows tax free
You can front load the plan. For 5 years and wouldn’t be considered a gift. Can’t give them gift for 5 years
Simple plan
Match plan for employees
Early withdrawal penalty
Assume for other investment .
Jury duty fee if remitted to employer
Deduct when arriving at AGI
ON EXAM
Average out income
Farmers
Fertilizer seeds plants on schedule F you could see.
Adjustments
For AGI
IEMBRACED EDUCATION HEALTH AND FARMERS
From AGI
Itemized deductions
COMMIT
Charity - buying cookies?!-qualified org
Other misc
Misc 2%
Medical- 10%
Interest
Taxes
Theft / casualty loss 10% 100$
Alimony
CANNOT
Charitable contributions
Carried over 5 years
50% of AGI deductible
Corps are limited to 10% of adjusted taxable income ATI -5 year carry forward
Prop contributions: subject to 2 rules
Ordinary income rule: sterm deduction lower of tax basis or fmv on date of contribution .
Long term cap gain: held higher than 1 year, resulted in long term gain, claim higher of v - limited to 30% of agi
Gambling losses
If itemize
No more than winnings
Other misc
Estate taxes on income in respect of decedent (Ird)
Gambling losses
Prof gamblers deduct non wagering business expenses on sch c
NO THRESHOLD
Misc 2%
A little of 100%
Excess of 2% of agi is deductible
BIT
EMPLOYEE BUSINESS EXPENSES
INVESTMENT COSTS : not fees, no advisory fees… if related to taxable income yes deductible
TAX AND attorney fees
Uniform
If could be worn elsewhere, not deductible like a tuxedo for a waiter
Medical
10% of excess of AGI
Cosmetic for medical reason deductible
Therapist deductible
Health insurance premium deductible
Drugs must be prescription
Minus insurance reimbursement - asked
Pool and elevator could be if for medical
Not life insurance
Not medical out of ssi
Expenses for others: cdirs (dependent) ..citizen, related live with you provide over 50% of support
If income or joint return test you can still deduct
Diseased spouse or dependent deduc in year , doesn’t matter if before or after death
Interest
Investment int- margin interest can’t be more than income on B
Test: mortgage loan interest—
Acquisition: loan to acquire and purchase house , interest of loan up to 1M
Home Equity: interest of loan up to 100thousand , borrowed and used on something else with it . The extra amount above 100k , interest on that amount wouldn’t be deductible
Taxes
State taxes, state and local, registration: not the fee
Fee fines federal FICA , forget it.
State sales tax was extended
Theft and casualty
Not gradual like termites and erosion. Has to be pretty sudden like natural
Unreimbursed that exceed 10% of AGI, -100$ per event
Measured by drop in fmv but limited to tax basis of asset . Costs incurred to repair, increase tax basis of property but doesn’t affect drop of fmv-loss
Itemized deduction phaseout
Total of itemized is reduced by smaller of:
3% of the amount that agi goes over limit
80% of itemized that are affected by limit - not GIMC Gambling losses Investment interest Medical expenses Casualty losses
Itemized deductions with no percentage limit
Other misc
Interest
Taxes
