Individual Taxes: Gross Income Inclusions and Exclusions Flashcards
Gross income includes group-term life insurance premiums carried by his or her employer to the extent that
the cost exceeds the sum of the cost of $50,000 of such insurance
The general rule is that prizes and awards are taxable. However, if you meet the following requirements, you can exclude the prize from gross income:
1) The prize must be made primarily in recognition of religious, educational, artistic, charitable, scientific, literary, or civic achievement.
2) The recipient was selected through no action on his part.
3) Substantial future services are not required.
4) The prize or award is transferred by the payor to a governmental unit or charitable organization based on direction from the recipient.
All of the requirements must be met in order to exclude the prize.
Commercial buildings placed in service after May 12, 1993
are depreciated over 39 years using straight-line depreciation and mid-month convention
Rule for S corporation shareholder employees for insurance premiums included in gross income
If they own less than 2% of the company, No Insurance premiums are Taxable.
If they own more than 2% of the company, the insurance premiums paid by the S corporation are fully taxable.
A portion of a taxpayer’s Social Security benefits may be taxable
For single taxpayers with provisional income above $34,000, gross income includes the lesser of:
1) 85% of Social Security benefits received or
2) 85% of excess of provisional income (defined as modified AGI + 1/2 Social Security benefit) over $34,000, plus the smaller of:
the amount includible under the old law (1/2 of Social Security) or
$4,500.
Any amount received as rent
must be included in income in the year of receipt whether the taxpayer is accrual or cash basis
Any amounts received by a landlord in consideration for cancellation of a lease are additional rent revenue (and not capitalized)
With Flexible Spending Account, Starting with 2014, a taxpayer’s company
will be able to choose an allowance of either a $500 carryover balance or a grace period through March 15 of the following year on flexible spending accounts. Therefore, there will no longer be a “use it or lose it” policy.
Interest expense on a home equity line of credit for an amount borrowed to finance a business
is fully deductible in Schedule C, Profit or Loss From Business
Charitable Deductions
is limited to 50% of AGI
Under the Affordable Care Act
taxpayers who do not have health insurance are now required to pay a “shared responsibility payment.” The 2015 amount is $325 per adult and $162.50 per child, with a maximum family amount of $975
All interest received by any taxpayer
is included in gross income unless specially exempt by law
IRA distributions qualify as made for first-time homebuyer expenses if:
1) the homebuyer is the taxpayer, spouse, child or grandchild of either, or ancestor of either,
2) the home is used as a principal residence by the homebuyer,
3) the homebuyer (and if married, the homebuyer’s spouse) has not had a present ownership interest in another principal residence within the 2-year period ending on the date that the current principal residence is acquired, and
4) the distribution is used within 120 days to pay for qualified acquisition expenses, such as buying, building or reconstructing the residence, as well as usual or reasonable settlement, financing, or other closing costs.
Only $10,000 of aggregate distributions received by an individual can be treated as made for qualified first-time homebuyer expenses. This is a lifetime limit.
A cash-basis taxpayer, unless he elects otherwise
is required to report the total increment in value of noninterest-bearing U.S. savings bonds issued at a discount (i.e., Series E and EE) at the time the bonds are surrendered
