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
Qualifying dependent requirements
C I R S J
Citizen or resident of mex or Canada .
Income, can’t make more than personal exemption
Relationship: all immediate and uncles and aunts but not cousins- cousins can be dependents if they lived with you the entire year
Support has to be over 50%. If more than one but no one provides more than 50% then multiple support agreement , can be given to someone who provides at least 10%
Joint tax return not filed. Unless only to get a refund
Child dependent requirements
J A R S
no joint tax return
Age or full time student. Any age if disabled . Otherwise, under 19 or full time student under 24
Residency /Related to you - live with you at least half the year
Support : must not have provided more than half of their own support. Scholarships don’t count. You don’t have to support 50%
Phase out exists
Ctc
Child tax credit- under age 17
Refundable
Child independent car
Children under 13
Adoption
Credit- carry forward 5 years
Phase outs
Education
Aotc: hope, first 4 years , 2500$
40% refundable
Lifetime credit : other years 24%
Savers credit : under threshold, you can put in ira and get credit
Foreign tax credit
Not claimed as itemized deduction
Elderly credits
Non taxable ssi
65+
Disabled
Less than 7500$ of income
Eic
Refundable
25? Age
SE tax
15.3 tax
If you make over 400$
High income above 250mfj+
Underpayment penalty
Estimated payments 4, 6, 9, 1 15th of each
If you pay 90% of this year or 100% of last year, you’re no penalty
.05 penalty per month ***
Understatement of penalty- inaccurate
20% penalty
AMT
Looks at itemized deductions and disallows or changes limits. If not paying enough then diff is amt
Considers committ
Penalty tax
Taxable income
+- adjustments =adj before exemptions
-exemption = amt income
Charity , other misc, theft and casualty you keep. Int on acquisition . Asked before
Others are disallowed so tax is higher, if total greater than current tax then that is taxed
Lost misc 2%, interest on equity , taxes
Non refundable credits can offset: like cdc hope
Adj and preferences for AMT
SIMPLE PIE Losing adj: Standard deduction Interest in home equity Medical expenses Personal and dependency exemption Taxes will all be added back Employee busi expenses 2% BIT
Preferences:
Private activity bond: added back, was previously included
ISO
EXCESS DEPRECIATION: when double declining is used, they use 150 instead of 200.
Reduces expense so income goes up
Makes income to go up but can lead to decrease also
Amt formula?
amti before exemption minus 150 Amount minus 25% of
Find rates too 26%?…
Charity contributions carried
Give me 5… years
NOL
Upside down looks like 2 and 20 . Go back 2 and forward 20
Net Capital loss
Offsets
CAP GAINS
cap 3 letters for go back 3 yrs
Gains has 5, for forward 5 years
Individuals 3k , no go back , forward indefinitely.
Investment interest
No go back
If interest expense greater than int income then net and carry excess forward indefinitely
Net passive loss
Not back
Forward indefinitely
25k a year loss
Net gambling loss
No back or forward
Just lose it
Rental royalty **
Roof and cops
