Module 1:Exemptions and Indiv. Tax Formula

Question 1

Individual Tax Formula

Answer 1

Gross Income

= Adjusted gross income=
{+standard deduction}
or
{+itemized deductions}

=Taxable income=
Federal Income tax

+Other taxes

= Tax due or Refund=

Question 2

Gross Income

Answer 2

Wages, Dividends, Interest, State tax refunds, Alimony received, Business income, Capital gain/loss, IRA income, Pension and annuity, Rental income/loss, K-1 income/loss, Unemployment compensation, Social security benefits, other income “gambling winnings”

Answer 3

Educator expenses, IRA, Student loan interest expenses, tuition and fee deduction, Health savings account, Moving expenses, One-half self-employment taxes, Self-employed health insurance, Self-employed retirement, Interest withdrawal penalty, Alimony Paid

Answer 4

Medical (in excess of 10% of AGI)
Taxes- state/local (income/sales and property)
Interest expense (Home and Investment)
Charity (Up to 50% AGI)
Casualty/Theft (In excess of 10% AGI, also subtract $100 per each event)
Misc. (In excess of 2% AGI)

Answer 5

$4,050 x # of exemptions (taxpayer takes own exemption, Spouse, Dependents)

Question 6

Qualifying Widow(er) with Dependent Child

Answer 6

Good for two taxable years, dependent must live with in household for whole year.

Question 7

Head of Household

Answer 7

Not married. A qualifying dependent must live in household for at least half year.

Question 8

Father/Mother vs Relatives

Answer 8

Parents not required to live with tax payer, relatives required to live with taxpayer. Must pay at least 50% support. ***Cousins do not count as relatives.

Question 9

Qualifying Dependent Exemption Child

Answer 9

Under age 19 or 24 and in college full-time for at least 5 months of tax year. Residence more than one half tax year. Pay half of bills.

Question 10

Qualifying Dependent Exemption Relative

Answer 10

One-half support. Income is less than exemption amount. Social Security, tax-exempt interest, and tax-exempt scholarships don’t include income. Cant have that person filing a joint return with someone else. If unrelated (freeloading boyfriend, cousin, foster parent) must live in household Whole year.

Question 11

Increased Standard Deduction

Answer 11

For being 65 years or older, and or blind.

Question 12

Multiple Support Agreement

Answer 12

Must contribute at least 10% persons support and meet dependency rules.