R2 - Individual Flashcards
What are deductibility requirements for traditional IRA?
BOTH conditions are met:
- High AGI (112k max for MFJ)
- Active participation in ER plan
Both spouses are evaluated individually UNLESS super rich (AGI over 183K)
What qualified educator expenses must be reduced by?
- excludable Series EE bond interest
- non taxable earnings from Coverdell
- non taxable qualified state tuition program earnings
- any reimbursement NOT reported on W-2
Minimum age to get an additional IRA catch-up contribution?
50 years
IRA mandatory distributions begin at the age of?
70.5 years
When are earnings distributions from a Roth IRA non taxable?
Made at least 5 years after the 1st day of the year of 1st contribution AND:
- After you are 59.5 years old
- Or disabled
- Or you are the beneficiary of the deceased Roth
- Or you are a first time homebuyer
Maximum contribution to Coverdell IRA?
2,000 per beneficiary
Independent of other IRA contribution limitation
Coverdell IRA limitations?
- For kids under 18
- 2,000 per kid
- MUST be distributed by the age of 30:
- to beneficiary - taxable + 10% penalty
- roll over to another family member - no tax or penalty
- Subject to phase out
Coverdell IRA benefits?
Per kid
Can be used for room and board
Can be combined with AOC!!!
Both principal and earnings non taxable
Student loan interest expense maximum amount?
2,500 subject to phase-out (80k/160k cutoff)
Tuition and fees deduction maximum amount?
4,000 subject to phase-out
Who qualifies for Archer MSA?
Limitations?
Self-employed or employees of small businesses (BTR)
Must be high deductible plan
Contributions lower than in HSA - 2,100 and 4,200
Moving expenses limitations
39-week in one year if employee
78 weeks in two years if self-employed
Travel & lodging and transporting household goods ONLY
Non deductible moving expenses?
Meals
House hunting
Breaking the lease
Temporary living expenses
Keogh maximum contribution and deduction?
Both limited to the lesser of 50,000 or
- 20% of SE income before Keogh deduction - for deduction
- 100% of net earnings (deduction amount 4X) - for contribution
How do you report attorney fees paid in discrimination cases?
Adjustment to AGI, limited to the amount claimed as income from judgement
Dependent’s standard deduction?
The GREATER of:
950
OR earned income + 300 (not to exceed regular st.deduction)
Dependent for medical deduction purposes?
SNR/T
Support - over half by TP
North American citizen
Whole taxable year lived with TP or a relative closer than a cousin/foster parent
Which insurance premiums do and do NOT qualify as deductible?
Accident insurance is OK
Life or against loss of earnings insurance - NOT OK
What part of real estate taxes is non deductible?
Street
Sewer
Sidewalk assessment taxes
I.e. anything outside your house except school
How are mortgage points deducted?
acquisition of indebtedness - deductible immediately
Refinancing - amortize over the loan period
What is investment income for investment interest deduction purposes?
Interest and dividends
Rents
Royalties in excess of expenses
Net STCG and LTCG - if elected to be taxed at marginal tax rate
Dividends automatically become ordinary when purchased with borrowed funds and are used in calculating the limitation for IIE
How is prepaid interest accounted for payee and payer?
Payer, borrower - spread over the life of the loan
Payee, lender - include all when received
Rules for deductibility of appreciated property?
At FMV if held over a year
At basis if held less
Limited to 30% of AGI
How is a contribution of services deducted?
Disallowed - value of time
Allowed - out-of-pocket expenses including mileage at 14 cents
Foreign exchange full-time student deduction (Kristiane deduction)?
Full-time
K-12 or under
$50 per each full month (15+ days)
Charitable contribution carryover timeframe?
5 year carryforward
What is the base for calculating casualty loss?
The lesser of adjusted basis or decrease in FMV
When a casualty loss of personal property canNOT be deducted?
If you have insurance and you didn’t notify the insurer.
Casualty loss is not allowed for?
Lost
Misplaced
Broken! property
When educational expenses are deductible as a miscellaneous deduction?
- maintain or improve skills (CPE credits)
- keep the job (employer requirement)
But not to meet minimum requirements!
Business use of home deductibility requirements (3)?
Used for work exclusively, on a regular basis and for the convenience of the employer
Which job hunting expenses are not deductible?
Finding a first job or an entirely new job
Tax prep fee deductibility limitation?
Non deductible if incident to divorce
UNLESS related to tax planning or pursuing taxable income
When does a hobby become an activity for-profit?
Shows profits in any 3 out of 5 years preceding the tax year
Horses - 2 out of 7
Miscellaneous deductions NOT subject to 2% AGI?
Gambling losses
Federal estate tax paid on income in respect of a decedent
Individual tax rates?
10, 15, 25, 28, 33, 35
Refundable credits?
Child tax credit Earned income credit Long-term unused minimum tax credit AOC Adoption credit
How is child and dependent care tax credit calculated?
20-35% of qualified expenditures, BOTH parents are working
Maximum amount of qualified EXPENDITURES:
3,000 - one child
6,000 - two or more children
Child and dependent care amount limitation?
Lesser of:
Earned income of spouse with lesser amount
Actual expenditure
Maximum amount (3,000/6,000)
Child and dependent care credit - definition of child and dependent
Qualifying child under 13!!!
Any disabled person - if more than half of the support provided by TP (doesn’t apply to disabled spouse)
Disabled = unable to take care of himself
Elderly and/or permanently disabled credit eligibility?
65 or older
Or retired because disabled
15% of eligible income
How is elderly and disabled credit calculated?
Base amount (5000 or 7500)
LESS: social security
LESS: one half of excess of AGI over 2nd base (7500 or 10000)
15% of balance is your credit
Describe AOC
100% of the first 2,000
25% of the next 2,000
40% refundable (1,000 max)
Not available if the student is convicted of a drug offence
Describe lifetime learning credit
20% of qualified expenses up to 10,000 ONE credit per family Unlimited years, but books not eligible MBA or CPE ok phase-out higher than for AOC
Describe adoption credit amount limitation and expense eligibility
12,650 per child, sick OR special needs
Medical expenses NOT OK - go itemize
Not for adopting spouse’s child or surrogate parenting
Describe retirement savings contribution plan eligibility (3)
At least 18 by year end
Not a full-time student
Not a dependent
Maximum amount of contribution 2,000
Maximum credit - 1,000 (i.e. 50% before phase out)
Describe foreign tax credit calculation and carryovers
Lesser of:
- Foreign taxes paid
- Foreign income/ Total income * US tax
Carryback 1, carryforward 10
General business credit limitation?
Take 100% on the first 25,000 of tax
75% on amounts over 25,000 of tax
Describe Work Opportunity Credit amount and eligible groups
40% of first 6,000 of first year’s wages
40% of first 3,000 of certain summer youth
Handicapped
18-24 year olds from poor families
Vietnam veterans from poor areas
Food stamps people
Describe child tax credit amount and eligibility
1,000
CARS except must be under 17!!!
May be used against FICA and MediCare taxes paid if a very low income family
Earned income credit age limitation and refundability?
How does having a qualifying child affect EIC?
26-64, both spouses if there are no qualifying children
QC increase the percentage of earned income credit
What are EIC percentages?
7.65 up to 45%
Cannot take if you have “disqualified income” over 3,100
Passive, portfolio, capital
Small employer startup costs credit amount
500 maximum
100 or less employees
How is AMT applied?
26% on the first 175,000
28% on the rest
Name AMT adjustments
P - passive activity losses A - accelerated depreciation post-1986 N - NOL I - installment contract of a dealer C - contract percentage of completion T - tax deductions I - interest on home equity loans M - medical, floor raised to 10% M - miscellaneous E - exemptions and/or standard deductions
AMT exemption formula?
33,750 - 0.25(AMTI - 112,500) single
45,000 - 0.25(AMTI - 150,000) MFJ
AMT tax preference items?
Always add-backs:
P - pre-1987 accelerated depreciation
P - private activity bond interest
P - percentage depletion in excess of basis
How is credit for elderly and permanently disabled calculated?
5,000 or 7,500 (MFJ and both qualify)
Less: excludable social security
Less: 50% of the excess of taxable income over 7,500/10,000
And then 15% of the balance is the credit
What is the statute of limitations for refund claims?
The later of:
Regular statute
Or 2! Year from the time tax was paid if not with the return
What is the statute of limitations to claim a refund related to bad debt or worthless securities?
7 years from the later of:
Due date
Filing date
When are estimates required?
Tax owed is 1,000 or more
W-2 with holdings are less than 90% of current year or 100% of last year’s tax (110% if AGI is over 150K)
How does a nonaccountable reimbursement plan work?
No proof of expenses
All allowance is included in gross income
Any expenses taken against gross income (mileage, reimbursements etc) are itemized deductions subject to 2%
