Practice Test Facts Flashcards
Taxable Income Calculation
Income-AGI deductions=AGI-Standard/itemized deduction-personal exemption=taxable income
Limit of standard deduction for single person
12,400
Stopping point of Alimony deductibility
12/31/2018
US Treasury Bills Gross Income Treatment
Included
Local Municipal Bond Gross Income Treatment
Excluded
State Income Tax Refund Gros Income Treatment
Included (if took itemized deduction)
Excluded is Standard Deduction
US Stock Dividend Gross Income Tax Treatment
Included
Tax Free to Taxable Muni Calculation
tax free rate x (1-tax bracket)
Fed Income Tax Treatment of Employer Long Term Care Premiums
Excluded even if discriminatory
Nontaxable portion of Group Term Life
Up to 50,000
Social Security Wage Base for 2020
$137,700
Social Security Tax Percent
6.2%
FICA/Medicare Tax Wage Base
Unlimited
FICA/Medicare Tax Percent
1.45%
Traditional IRA Phase Out Range (MFJ)
104,000-124,000
Traditional IRA MAx Contribution Limit
6,000
Trad IRA Reduced Limit Calculation
Contribution Limit x[(AGI - Lower Limit)/20,000]
HSA over contribution tax
6%
HSA Early Distribution/Non-medical expense tax
20% (Before age 65)
Carry-over timeframe for Charitable Contributions
5 years
Casualty Loss Deductibility
0 after 2017 (unless natural disaster)
Post 2017 Mortgage Interest Principal Limit
750,000
Deductible Expenses for Donated Items
Materials and Expenses (not time or property)
Medical Expense Deductibility
Anything over 7.5% of AGI (anything greater is deductible)
Pre-2017 Mortgage Interest Limit
$1,000,000
Mortgage Refinance Interest Deducibility
If refinancing a pre-2017 loan continues to be $1,000,00. unless you borrow more than principal at time of refinance
QBI Deduction
Lesser of 20% of QBI or 20% of taxable income
Rental Property Mixed Use Requirement
Property rented for 15 or more days, and personally used for the greater of 14 days of 10% of rented days
Rental Property Non Taxable Requirement
Rented less than 15 days per year
Hobby Income Taxability
All income is taxable
Net Operating Loss (NOL) Limits
After 2017 80% of income in that year
Executive Compensation Deductibility (Who’s included)
CEO, CFO, 3 most highly compensated executives
Executive Compensation Deductibility (Limit)
$1,000,000
Executive Compensation Deductibility (What’s Included)
Cash compensation, not non taxable compensation (qualified retirement plan)
Child Tax Credit Amount
$2,000 per child
Child Tax Credit - Start of MAGI deduction
$200,000
Child Tax Credit Reduction Rate
$50/$1,000 in excess of $200,000 for Single
Child Tax Credit Age Limitation
under but not including age 17
Dependent care credit calculation
20% on up to $3,000 per qualifying child
Dependent care credit limit
20% of 6,000 in expenses for 2 or more children
Cost Basis for a business asset
All costs, including freight, installation, testing costs, and sales tax
STCL or LTCL limit
$3,000 (times % tax bracket)
Gain Taxation of Inherited Property
Automatically shifts to LTCG
Social Security Adjusted Base Amount MFS
$0
Social Security Base Amount MFS
$0
Calculation of Social Security Taxation (under base amount)
Not applicable, not taxed
Calculation of Social Security Taxation (between base amount and adjusted amount)
Lesser of:
- 50% of SS Benefits
- 50% x [MAGI+(50%SS Bene)-Base Amount]
Calculation of Social Security Taxation (above adjusted amount)
Lesser of:
- 85% of SS Bene
- 85% x [MAGI+(50% SS Bene)-Adjusted Base Amount] + Lesser of:
- between base and adjusted calculation
- OR $4,500 (single)/$6,000 (MFJ)/ $0 MFS
Non-Taxable Determination for Rental Property
Rented for 15 days of less
Mixed-Use determination for Rental Property
Rented more than 15 days
Used by owner for greater of:
- 14 days
- 10% of rental days
Rental Activity Determination for Rental Property
Rented more than 15 days
Not used by owner for greater of:
- 14 days
- 10% of rental days
Non-Taxable Rental Property Impact in Income
Income not taxable, expenses not deductible
Rental Activity Rental Property Impact in Income
Must report income
Can deduct ordinary, necessary, and reasonable expenses (even if a loss)
Mixed-Use Rental Property Impact in Income
All income reported
Can only deduct expenses to offset income (can’t take a loss)
QBI Deduction Tier 1 Requirement
Taxable Income less than Threshold Amount
QBI Deduction Tier 2 Requirement
Taxable Income between Threshold and Phaseout Amount
QBI Deduction Tier 3 Requirement
Above Phaseout Amount
QBI Tier 1 Deduction Calculation
Lesser of:
- QBI x 20%
- ATI x 20%
QBI Tier 2 Deduction Calculation
QBIx20% - Greater of:
- 50% W2 wages paid by business
- W2 wages x 25% + (2.5% x unadjusted basis on qualified property)
QBI Tier 3 Deduction Calculation
Lesser of:
- QBI x 20%
- Greater of:
- W2 Wages x 50%
- W2 wages x 25% + (2.5% x unadjusted basis on qualified property)
Qualifications to be classified as alimonty
- the payments are in cash.
- the agreement or decree does not specify that the payments are not alimony for federal income tax purposes.
- the payee and payer are not members of the same household at the time the payments are made.
- there is no liability to make the payments for any period after the death of the payee.
Family Loan Interest Income Calculation (less than $100,000)
Lesser of:
- Loanee’s investment income
- Federal rate - actual rate x loan amount
Group Term Life Taxable Portion Calculation
{[(Coverage - 50,000)/1,000] x premium} x 12
Student Loan Interest Phase Out Range MFJ
$140,000-$170,000
Student Loan Interest Phase Out Range MFS
$0
Student Loan Interest Phase Out Range Single
$70,000-85,000
Short Term Capital Loss Timeframe
1 year and 1 day
American Opportunity Tax Credit Phaseout (MFJ)
$160,000-$180,000
Lifetime Learning Credit Phaseout (MFJ)
$116,000-$136,000
American Opportunity Tax Credit Phaseout (Single)
$80,000-$90,000
Lifetime Learning Credit Phaseout (Single)
$59,000-$69,000
American Opportunity Credit Amount
First $2,000 @ 100%
Next $2,000 @ 25%
($2,500 Max)
American Opportunity Availability
First 4 years of postsecondary education (4 years max)
American Opporunity Requirements
persue undergraduate or education credential
enrolled at least 50% of time for a year
No felony drug convictions
Lifetime Learning Credit Amount
$10,000 of expenses @20% ($2,000 max)
Lifetime Learning Availability
All years of postsecondary or improved job skill learning (unlimited years)
Lifetime Learning Credit Requirement
Pursue degree or educational credential
Take at least 1 course
QBI Threshold and Phaseout (MFJ)
$326,600 - $426,600
QBI Threshold and Phaseout (Non-MFJ)
$163,300 - $213,300
Social Security Band (MFJ)
$32,000-$44,000
Social Security Band (Non-MFJ/MFS)
$25,000 - $34,000
Social Security Band (MFS)
$0
Section 179 expense deduction
Option to elect to expense property placed in service during the year instead of depreciating over time
Section 179 Use Limitations
An asset must be used more than 50% of the time. If used less than 100% than only the portion of time used for business can be epxensed
Section 179 Limit
$1,040,000
Section 179 Total Depreciable Property Limit (all property)
$2,590,000 (dollar for dollar reduction if above)
Straight Line Depreciation Timeline (Real Estate for Residential Rentals)
27.5 years
Straight Line Depreciation Timeline (Real Estate for Commercial Use)
39
Personalty
Any property other than real property
Basis Used for Gifted Stock
either FMV at time of gift, or Donor’s original basis (depends on price executed when sold)
basis for Gifted Stock sold above FMV/Donor Basis
The higher of the two
basis for Gifted Stock sold below FMV/Donor Basis
The lower of the two
basis for Gifted Stock sold below FMV/Donor Basis
No gain or loss calculated
Additional Deduction Amount and Eligibility
$1,300
- Age
- Blindness
- Dependents
What compensatory or punitive damages are excluded from income
compensatory damages only
