R2 Adjustments & Deductions Flashcards
Which is a deduction to AGI: child support or alimony?
Alimony
Child support is not desirable by payor or taxable by payee
List the deductions for AGI
Educator expenses IRA contributions Student Loan interest expense Tuition and fee reduction HSA 1/2 self employed tax Self employed health insurance Self employed retirement Interest withdrawal penalty Alimony paid or received Moving expenses Attorney fees in discrimination case Domestic production activity reduction
What are the limits in IRA deduction?
For IRAs the lesser of $5,500 or individuals compensation; with a non working spouse limit is $11,000 provided the combined earnings of both spouses total at least that much
If spouse is active in a retirement plan the allowable deduction to arrive to AGI is phased out proportionally for AGI between $59,000 and $68,000 ($95,000 and $115,000 for MFJ)
Phase out percentage is 20% of the maximum IRA deduction (AGI less base)
What are the limits on non deductible IRAs?
The lesser of:
- $5,500
- Individuals compensation
- Limit not contributed to other IRAs including Roth
Earnings on contributions accumulate tax free until distributed
What is the time limit in Coverdell Education Savings Account?
Any amounts remaining when beneficiary reaches age 30 must be distributed:
- To the beneficiary, taxable and 10% penalty applies
- Rollover to another family member to penalty and nontaxable
Max contribution is $2,000 per year per beneficiary
What are the limits on deductions on Keogh plan?
Keogh plans are for self employed taxpayer and their employees
Deductible is the lesser for 25% of net earning from self employment after keogh and 1/2 self employment tax deduction or $51,000
The max annual contribution can exceed the deductible amount for the year since it is limited to $51,000 or 100% of compensation of less than $51,000
Described the self employed deductions?
1/2 self employed tax
Self employed health insurance 100% deducted
Self employed retirement
What are the requirements for moving expenses to be deductible?
Must change job sites
50 miles move (distance from former residence to new job site must be 50 miles or more of distance from former residence to former job site)
Must work in new location for 36 weeks or more in 12 months or if self employed 78 weeks or more In 24 months after arrival (75%)
Note: there is a per mile allowance or actual out of pocket, meals, per move hose hunting, breaking a lease and temporary living expenses are not deductible
What is the additional deduction for elderly and/or blind?
Single $1,500, married $1,200
Per person per item if both blind and 65 take deduction twice per person
What taxpayers are not eligible to use the standard deduction?
- One spouse itemizes deductions on a separate return
- Taxpayer is dual status or nonresident alien
- Taxpayer has a short tax year
The standard deduction is limited if taxpayer can be claimed on another’s return (greater of $1,000 or earned income of dependent plus $300 up to the basic standard deduction amount)
Identify major classes if itemized deduction
Medical and dental expense Taxes paid (not federal) Interest paid (not personal) Gifts to charity Casualty and theft losses Miscellaneous subject 2% AGI
What are the limitations on medical expense?
- Deductible to extent they exceed 10% AGI or 7.5% if 65 and older
- Cost of elective cosmetic surgery not allowed
- Self employed individuals may deduct 100% of premiums for gross income
- A dependent must only meet the support, relationship and citizenship /residency test
Identify taxes that are deductible as itemized deductions
State and local income tax
Real estate taxes
Personal property taxes
Foreign taxes (either full deductible or credit)
Identify the types of interest that are deductible and non deductible
H - Home mortgage, home equity, points paid on principal but points or refinance are capitalized over life of loan
I - Investment interest only to net income and excess can be carried forward indefinitely
P - Personal consumer tax NOT deductible
P - Prepaid interest using accrual
E - Education loan is NOT itemized deduction is deduction to arrive to AGI
What are the limitations in charitable contributions deductions?
Overall limit= 50% of AGI
- Cash can be all 50%
- Long term property can be the lesser of: 30 % AGI or FMV or the remaining amount or reach 50% AGI
Excess contribution carry forward for 5 years
Cash contributions need bank record to justify
If property not long term use basis
