R1 Flashcards
Qualifying child
Close relative
Age limit
Residency
Eliminate Gross Income
Support Test
Qualifying relative
Support test
Under $5050: Taxable Gross Income 2024 test
Precludes depending filing joint return
Only US citizens
Relative test or lives with taxpayer for whole year
Qualifying surviving spouse requirements
- spouse died in one of two previous years and did not remarry
- there is a child claimed as dependent
- child lived in home for whole current year
- paid over half cost of keep up home for child
- could have filed joint return in year died (single if no child is involved)
if taxpayer spouse dies in august, how do you file
as married filing jointly even if died earlier in the year
if you pay for more than half of your parents living - you qualify as…
head of household (if not married)
IRA deduction (adjustment to arrive at AGI)
can contribute and deduct up to $7000; or deduct up to amount of taxable income
alimony paid pursuant to a divorce before 2018
all considered income
self employment taxes - how much is deductible
50%
QBI deduction amount and limitation
Deduction: 20% of QBI amount given
Limited to taxpayers with taxable income (before QBI deduction) of less than $241,950 (381,000 for married) for category 1 (easiest) - cat 2 means no QBI deduction, and 3 isnt tested
kiddie tax
net unearned income of dependent child under 18 is taxed at parents rate.
=Childs unearned income - 1300 deduction - 1300 that is taxed at the Childs tax rate
“net earnings from self employment”
92.35% of the business income amount
section 199A QBI deduction is the lesser of:
20% of taxable income or 20% of QBI
QBI - taxable income at or below $191,950 or $393,900
QTB and SSTB use full 20% deduction
QBI - above $241,950 or $483,900
QTB: use full W-2 wage and property limation and SSTB there is no QBI deduction allowed
category 2 QBI calculation (above limitation on taxable income)
- calculate tentative qbi (20% x QBI)
- take greater of: 50% of share of w-2 wages (given) OR 25% of w-2 share given + 2.5% of UBIA
- take lesser of step 1 or step 2
when calculating QBI deduction, and there is health insurance on W-2
subtract amount from ordinary business income before calculating the QBI deduction
mortgage interest (sch A)
full amount is deductible on house up to $750,000
points for a mortgage
also fully deductible
personal credit card interest
not deductible - its just a personal expense
home improvements
are deductible - use percentage if given
for insurance covered, net loss is:
the total fair value of each item lost (or lesser of adjusted basis or decrease in FMV)
insurance problems: casualty floor
deduct $100 (for each main storm) after you take net loss - insurance covered
AGI floor for insurance problems
10% of AGI for insurance
contributions to a roth IRA
not deductible (earnings and deductions from roth IRA are not included in AGI)
redoing something in house due to flooding etc
must be a federally declared disaster
medical insurance premiums
are deductible from AGI
homeowner insurance premiums on personal prop
are not deductible (would be if a rental on Sch E)
life insurance premiums
are not deductible
alimony - before end of 2018
are deductible because are included in income
sales tax
is deductible from AGI - but you can choose to itemize or take standard deduction * limited to 10,000
investment interest expense
deductible from AGI - limited to net investment income
gambling losses
deductible up to gambling winnings - from AGI
interest paid on a qualified education plan
deductible up to 2500 for AGI - if used to pay education expenses
charitable contributions: when there is a value on top
subject value you are getting from the donation amount to get total value that is deductible
charitable contributions - what value to use
use the FMV or the time of thrift value when given
is contribution of services considered charitable contributions?
no, not deductible
if driving for meals on wheels what is deductible
can deduct the full amount of driving times the centers per mile
charitable contribution AGI limitation
60% then carry forward 5 years
medical expenses - if using credit card but paid in following year
when charged, it is deductible even if not paid
chiropracter and physical therapist
both deductible
medical home improvements (like adding an elevator)
deduct amount: amount of putting in elevator - difference of improvement of FMV + any upkeep paid on it
medical deduction amount for Sch A
7.5 % of AGI is subtracted from total medical expenses to get to qualified medical expenses deducted
personal disability insurance premiums
Personal disability insurance premiums are not deductible (but disability insurance benefits are also generally not taxable when received—if the premiums are paid by the taxpayer with post-tax dollars). Only medical insurance premiums are deductible as qualifying medical expenses.
which credit can result in a refund
earned income credit
self employment tax
not a deduction - only can deduct state tax
contributions to health savings account
not deductible for medical expenses, it is deduction to get to AGI
Filing status- Single
unmarried or legally separated as of the last day of year
Filing status- who can file a joint return?
married, or if one spouse dies during the year
Filing status- qualifying window with dependent child
-can file as joint using those standard deductions and rates for the two years after year of death unless remarries.
-surviving spouse must pay for more than half the cost of maintaining a household where the dependent child lives for the whole year.
Filing status- Head of Household
doesn’t qualify for anything else and maintains the home for more than half the year, which is the principal residence of a qualifying person (child, parent or relative)
Qualifying child for head of household status
follows qualifying child rules:
Close relative
Age limit
Residency and filing requirements
Eliminate gross income test
support test
Qualifying parent for head of household status
dependent parent does not have to live with the taxpayer, but taxpayer must maintain the home for the parent for the entire year.
Qualifying relative for head of household status
Grandparents, siblings, etc. must live with the taxpayer (cousins, foster parents, and unrelated dependents do not qualify)
What interest is taxable
from federal bonds, corporate bonds, US treasury bonds, and interest from prior year refunds
What interest is NOT taxable
state and local government bonds are not taxable interest - *municipal bond interest is not taxable
What taxes are deductible
state, local and foreign
what taxes are NOT deductible
federal taxes (including social security), inheritance taxes and sch C and Sch E related taxes are not tax deductible on Sch A
life insurance coverage and medical insurance paid by employer
both are NOT deductible or taxable for taxpayer - they are both considered nontaxable fringe benefits
what does rental income include
rent payments, rent paid in advance, improvements in lieu of rent, and rent cancellation payments
student loan interest
above the line to arrive AGI deduction - limited to $2500 for qualified education expenses and eventually phases out
phase out rule for contribution to traditional IRA
if taxpayer and spouse do not participate in any other plans, then there is no AGI phase out for the deduction for contributions to traditional IRAs
educator expenses
up to $300 above the line AGI deduction
Roth IRA contributions deductible?
non deductible
Traditional IRA contributions deductible?
up to $7,000 above the line is deductible, then phase out begins if AGI is over $77,000
casualty loss calculation
smaller of damages or FMV decrease
-Insurance recovery
=Taxpayers loss
-$100 floor
=Eligible loss
-10% of AGI
=deductible loss (answer)
what tax credit can result in a carryforward/carryback
foreign tax credit - back one, forward ten years
how to value stock in charitable contributions
held for more than a year: use FMV
held for less than a year: use lower of cost or FMV
how to value services in charitable contributions
cannot deduct services - but can deduct out of pocket expenses related to volunteer work
sch E property mortgage
goes on Sch E, so a gets you to AGI, but not included in Sch A
Real estate broker sch C - how to treat illegal broker commisions
not included in expenses
sch C fines and penalties
not deductible (ex is parking tickets)
what tax credit can create a refund even if there is no tax liability
child tax credit
basis for paintings that are a gift
follow the same rules as regular gifts - use rollover basis unless FMV at date of gift unless it is less than other - then use special rules
how to treat workers compensation payments
excluded from taxable income for individuals
how to treat damages received for slander
“nonphysical injury/slander” are included in taxable income for individuals
how to handle an employee that has too much social security tax withheld (greater than the max for current year)
employee may claim the excess as a credit against income tax, if the excess was correctly withheld by two or more employers
how does a child in college record state scholarships and loans from college financial aid
if they are a degree seeking student, then not included in taxable income
