Memorize this Flashcards
Gross income may be reduced by “above-the-line deductions” to arrive at Adjusted Gross Income (AGI).
Also known as “deductions for AGI,” these are found on Schedule 1, Part 2 (Adjustments to Income):
Educator expenses
for classroom supplies, up to $300 per individual ($600 max for two educators filing MFJ)
Business expenses
for government officials who work on a fee basis, performing artists, and members of the military reserve forces (reservists) who traveled more than 100 miles to perform reserve services
Health Savings Account (HSA)
contributions made with after-tax money
Moving expenses
for active-duty members of the U.S. Armed Forces
Self-employment tax
The employer portion of the (i.e., ½ SE Tax)
Retirement account contributions
for self-employed individuals and small business owners
Health insurance premiums
The cost of for self-employed workers, including dental and long-term care insurance
Early withdrawal penalties
of savings accounts, like a certificate of deposit (CD)
Alimony payments
for agreements that took effect before 2019 (the deduction for alimony payments was ended in 2018)
Traditional IRA Contributions
(subject to phaseouts based on filing status and active participant status)
Student loan interest
deduction for up to $2,500 of interest paid on student loans
Exam Tip: Remember the key numbers related to imputed interest calculations:
$1,000 (NII of this amount or less is not imputed on loans between $10,000 - $100,000)
$10,000 (loans below = not imputed; loans greater than & up to $100,000 = lesser of borrower’s NII or AFR)
$100,000 (loans above use the AFR to calculate imputed interest)
Member of the Reserves are able to deduct expenses (travel, meals, lodging) if
performing services & 100+ miles from home.
IRS looks closely at three situations to determine if interest must be imputed:
Gift loans: provided out of love, affection, or generosity
Corporate shareholder loans: from a corporation to its shareholder
Compensation-related loans: from employer to employee
AMT Deferral Items may include:
1987 and subsequent-year depreciation based on ADS
Amortization of circulation, research and experimental costs
Amortization of mining exploration and development costs
Amortization of pollution control costs for facilities placed in service after 1986
Use of percentage completion for long-term contracts entered after February 28, 1986
Installment-sale adjustments
Gain or loss adjustments on the disposition of business property
Incentive stock options
Passive activity loss limitation
AMT net operating loss
To be depreciable, the property must meet all the following requirements.
It must be property owned by the taxpayer.
It must be used in a business or an income-producing activity.
It must have a determinable useful life.
It must be expected to last more than 1 year.
Useful Life for Common Depreciable Assets
Autos 5
Computers 5
Heavy Machines 7
Office Furniture 7
Residential RE 27.5
Non-residential (commercial) RE 39
acceptable reasons for a reduced Section 121 exclusion as stated in the IRC:
Job relocation
Employment change leaves you unable to pay your living expenses
Qualifying for unemployment benefits
Health issues
Divorce or legal separation
Birth of twins or other multiples
Damage to home from disaster
Condemnation or seizure of the property
Other unforeseen circumstances
1231 property is both:
Property that is used in a trade or business
Property held for the production of income
