R1 - Federal Taxation of Individuals Flashcards
How much is included in the taxable income from below example?
Employer reimbursement of college tuition expenses of $8,000
Up to $5,250 may be excluded from gross income for payments made by an employer on behalf of an employee for an employee’s educational expenses. For example, $5,250 of the $8,000 reimbursement is nontaxable and $2,750 is taxable.
How much is included in the taxable income from below example?
$15,000 scholarship received by a qualified degree-seeking student used for the following expenses: $10,000 tuition; $2,000 books; $3,000 room and board
Scholarships for a degree-seeking student are excludable from income only up to amounts actually spent on tuition, fees, books, and supplies. Amounts used to pay for other items (such as room and board) or retained by the recipient would be taxable. Therefore, $12,000 ($10,000 + $2,000) would be nontaxable in this case and $3,000 (expended for room and board) would be taxable.
Is Gifted property or Cash taxable income?
No, Property or cash received as a gift is nontaxable.
Is Worker’s Compensation included in Taxable Income?
Payments received under a workers’ compensation plan for work-related personal injury or sickness are nontaxable.
Is Inherited Cash or Property included in Taxable Income?
Inherited cash or property is not taxable to the recipient.
How much Medical (and Hospital) insurance premium paid by a taxpayer with after-tax amount deductible?
Medical (and hospital) insurance premiums paid by a taxpayer (not by the employer) with after-tax dollars are fully deductible as a medical expense.
How to calculate earnings of business income on Self Employment?
92.35% is built into Schedule SE so multiply Self Employment net income by 92.35%
How Much Self-employed taxpayers are allowed to take a deduction?
50% of self-employment Tax.
What is the maximum amount Jennifer may deduct for contributions to her SEP IRA for the year?
The maximum annual deductible amount for self-employed individuals to a SEP IRA is the lesser of $69,000 (2024) or 20 percent of net earnings. “Net earnings” is defined as net self-employment income minus 50 percent of self-employment (S/E) taxes.
Net self-employment income
50,000
50% of self-employment taxes
(3,532)
[$7,064 × 50%]
Self-employment earnings before SEP IRA
46,468
Times 20%
× .20
Calculated SEP IRA Deduction
9,294
The 20 percent of self-employment earnings is less than the maximum of $69,000 (2024), so the SEP IRA deduction is $9,294.
What is the amount of charitable contributions deductible on Stein’s current year income tax return?
Stein may deduct $24,000 on Stein’s current year income tax return.
The taxpayer can deduct long-term (i.e., held longer than 12 months) capital gain property at the higher fair market value (higher than cost basis) without paying capital gains tax on the appreciated portion. This deduction is limited to 30 percent of adjusted gross income (AGI). A five-year carryforward period applies.
Fair market value of appreciated long-term stock
25,000
Less:
Limitation
AGI
80,000
Times 30%
× 0.30
Deduction limit
(24,000)
Carryforward
1,000
What are the requirements for Taxpayer’s child to qualify for the earned income credit?
1) The child must have a qualifying relationship with the taxpayer.
2) The child must be under 19, or under 24 and a full-time student.
3) The child must live with the taxpayer in the taxpayer’s main home for more than half of the year.
How much Business meals allowed to deduct from taxable income?
50% is allowed to deduct
What was the maximum amount of the charitable Property contribution allowable as an itemized deduction?
deduction for the stock is the lesser of the adjusted basis, The contribution of ordinary income property to public charities is limited to 50% of AGI.
What is excluded from GROSS INCOME?
Interest on municipal bonds (bonds issued by state or local governments) is excluded from gross income.
What amount must Johnson include in gross income for Group Term life insurance and Wages?
The first $50,000 of group term life insurance is a nontaxable fringe benefit. Amounts exceeding this are taxable based on IRS tables. The total group term life insurance here is $200,000 (twice the salary of $100,000). The amount exceeding $50,000 is $150,000. The cost given here is $2.76 per $1,000 of insurance. $150,000 / $1,000 = 150; 150 × $2.76 = $414. So the total amount included in gross income is $100,414 ($100,000 Wages + $414).
How much is the maximum taxable social security benefits?
The maximum amount of taxable Social Security benefits is 85% of Social Security benefits received
How much is the minimum Gross income to qualify as a qualifying relative?
How many years the Charitable contributions subject to the 60-percent limit that are not fully deductible carry forward?
Charitable contributions subject to the 60 percent limit that are not fully deductible in the year made may be carried forward five years.
How Capital loss treated to arrive at AGI?
Capital losses in excess of capital gains are deducted (up to $3,000) on Form 1040 before the calculation of adjusted gross income. Accordingly, this is a deduction to arrive at adjusted gross income.
IS scholarship Taxable for degree seeking students?
Scholarships are nontaxable for degree-seeking students to the extent that the proceeds are spent on tuition, fees, books, and supplies
How Alimony is treated?
Alimony payments (on divorce agreements finalized on or before December 31, 2018) are an adjustment, which is a deduction to arrive at adjusted gross income. Alimony paid on divorce settlements finalized after December 31, 2018, is not deductible.
How many days the house should be rented to be considered as rental house and taxed as rental property?
15 DAYS
How donation of long term asset treated for deduction?
The deduction of appreciated long-term capital gain (LTCG) property is limited to 30 percent of AGI.
How Investment Interest Expense is treated?
Investment interest expense is deductible to the extent of net investment income. Investment interest expense in excess of net investment income can be carried forward indefinitely.
