R-2 2013 Flashcards
List the deductions for AGI.
Educator expenses; IRA; Student Loan Interest Expenses; Tuition and Fee Deduction (expired 12/31/11, not yet extended); Health Savings Account; Moving Expenses; One-Half Self-Employment FICA; Self-Employed Health Insurance; Self-Employed Retirement; Interst Withdrawal Penalty; Alimony Paid; Attorney fees paid in certain discrimination and whistleblower cases; Domestic Production Activities Deduction.
Which is a deduction for AGI: Child support or alimony?
Deduction for (to arrive at) AGI = Alimony Paid. Child support is not alimony and is not deductible bythe payor or taxable to the recipient.
What are the limits on IRA deductions?
For IRAs, the lesser of $5,000 or indivdual’s compensation; with a nonworking spouse, limit is $10,000 provided the combined earnings of both spouses total at least that much. Where a spouse is an active participant in an employer retirement plan, the allowable deduction to arrive at AGI is phased out proportionally for modified AGI between $58,000 (base) and $68,000 ($92,000 and $112,000 for married filing jointly) [2012]. Phase-out percentage is 20% of the maximum IRA deduction (AGI less base).
What are the limits on nondeductible IRAs?
The lesser of: a. $5,000 for 2012; b. Individual’s compensation; c. Limit not contributed to other regular and Roth IRAs. Earnings on such contributions will accumulate tax-free (deferred) until withdrawn.
What is the time limit on Cpverdell Education Savings Accounts (Education IRAs)?
Any amounts remaining when the beneficiary reaches the age of 30 must be distributede. “Left over funds”: Must be distributed to a beneficiary, are taxable, and a 10% penalty is assessed, or Rollover to another family member is permitted with no 10% penalty.
What are the limits on deductions to Keogh plans?
Keogh plans are for self-employed taxpayers and their employees. Deductible amount is lesser of 25% of net earnings from self-employment (after Keogh deduction) and one-half of self-employment tax or $50,000 (2012). The maximum annual addition (contribution may exceed the deductible amount for hte year. It is limited to the lesser of $50,000 (2012) or 100% net earnings if compesation is less than $50,000.
Describe the self-employed deductions (“adjustments”) for AGI.
Self-employment tax: 50% of self-employment tax. Self-employed health insurance: 100% may be deducted.
What are the requirements for moving expenses to be deductible?
Must change job sites; 50-mile move (distance from former residence to new job site must be 50 miles or more of the distance from former residence to former job site); Must work in new location for 39 weeks during the 12 months following arrival (if self-employed, 78 weeks during the 24-month period after arrival). Note: There is a per-mile car allowance or actual out-of-pocket amounts. Meal costs are not deductible.
What is the additional deduction for elderly and/or blind?
For 2012, if 65 or older, add $1,450 (single or head of household), or $1,150 (married filing jointly or separately or qualifying widow[er]). If blind, add same amounts as above. If both are over 65 and blind, amounts are $2,900 and $2,300, respectively.
What taxpayers are not eligible to use the standard deduction?
One spouse itemizes deductions on a separate return; Taxpayer is a dual-status or nonresident alien; Taxpayer has a short tax year. The standard deduction is limited if taxpayer can be claimed on another person’s return (greater of $950 or earned income of dependent pluss $300 up to basic standard deduction amount).
Identify the major classes of itemized deductions.
Medical and dental expenses; Taxes paid; Interest paid; Gifts to charity; Casualty and theft losses; Miscellaneous deductions subject to the 2% floor (job expenses, investment expenses, tax preparation); Other micellaneous deductions not subject to the 2% floor (gambling losses to extent of winnings).
What are the limitations on medical expenses?
Medical expenses are deductible to the extent they exceed 7.5% of AGI. Cost of surgery for elective cosmetic reasons is not deductible. Self-employed individuals may deduct (100% of medical insurance premiums from gross income. A dependent for medical expenses must meet only the support, relationship, and citizenship or residency tests.
Identify the taxes that are deductible as itemized deductions.
Taxpayers have a choice of deducting either the local sales tax (expired on 12/31/11, not yet extended) or state and local income tax. Other deductible taxes include: Real estate taxes; Personal property taxes; Foreign taxes (either deductible or may be taken as a credit).
Identify the types of interest that are deductible and nondeductible.
Qualified residence interest on principal and second residence is subdivided into: Acquisition indebtedness ($1,000,000 limitation); Home equity indebtedness ($100,00 limitation); Points paid on a principal residence mortgage loan are fully deductible; Points paid to refinance a home (or for a home equity loan) must be capitalized and deduction spread out over life of loan; Certain mortgage insurance premiums. Interest on loans for investment purposes, limited to net investment income, can be carried forwar. Prepaid interest (use accrual basis for determining deductible amount). Educational loan interest is an adjustment and not an itemized deduction. Consumer interest is NOT deductible.
What are the limitations on charitable contribution deductions?
Overall limit = 50% of AGI: Cash, may be all 50%; Long-term capital gain property (deduct FMV) is limited to the lesser of: 30% of AGI, The remaining amount to reach 50% after cash contributions. Excess contributions can be carried forward five years. Cash contributions must be substantiated by a bank record or a written communication by the charitable organization.
