R2 Individual Tax - Adj, Ded, Cred Pt 2 Flashcards
What are the limitations on medical expenses?
- Medical expenses are deductible to the extent they exceed 10% of AGI (7.5% for taxpayers age 65 and older)
- Cost of surgery for elective cosmetic reasons is not deductible
- SE individuals may deduct 100% of medical insurance premiums from gross income.
- A dependent for medical expense must meet only the support relationship, and citizenship or residency tests.
Identify the taxes that are deductible as itemized deductions.
- Taxpayers must have a choice of deducting either the local sales tax (expired 12/31/13) 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:
A) Acquisition indebtedness ($M limitation)
B) Home equity indebtedness ($100K limitation)
C) Points paid on a principal residence mortgage loan are fully deductible
D) Certain mortgage insurance premiums
- Interest on loans for investment purposes, limited to net investment income cen be carried forward
- Prepaid interest (use accrual basis for determining amount)
- Educational loan interest is an adjustment and not a itemized deduction
- Consumer interest is NOT deductible
What are the limitations on charitable Contribution deductions?
1) 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 or the remaining amount to reach 50% after cash contributions
2) Excess contributions can be carried forward for 5 years.
What is the limit on nonbusiness casualty and theft losses?
If partial loss: Deduction is based on decrease in FMV not to exceed AB
If total loss: Deduction is AB
Aggregate losses are reduced by:
- Insurance recovery
- $100 per casualty / theft event
- 10% of AGI
Identify some miscellaneous deductions subject to the 2% of AGI floor
- unreimbursed business expense
- Educational expenses not deducted above AGI
- Uniforms
- Business gifts ($25 limit per recipient per year)
- Business use of home
- Employment agency fees
- Expenses of investors
- Subscriptions to professional journals
- Tax preparation fee
Identify some miscellaneous expenses NOT subject to the 2% AGI floor:
- Gambling losses
2. Federal estate tax paid on income in respect of a decedent
Identify some tax credits
Nonrefundable tax credits
- Foreign tax credits
- Child and dependent care credit
- Elderly or disable credit
- Education credits
- Adoption credit
- Retirement plan contribution credit
- General business credit
- Long-term unused minimum credits
Refundable credits
- Child tax credits
- EIC
- Withholding taxes
- Excess Social Security paid
What are the child/dependent care credit limitation?
Up to 35% of eligible expenditures or $3,000 max ($6K for 2 or more dependents). Maximum of $15K AGI, reduced by 1% for each $2K increment over $15K to a minimum of 20%
A qualify child is one under age 13 for whom an exemption may be claimed, any disabled dependent who is unable to care for self, or a spouse who is disabled and unable to care for self.
Described the tax credit for the elderly or disabled.
- Either at least 65 or totally and permanently disabled and have disability income.
- If single or married and only one is over 65, 15% of $5K reduced by nontaxable SS benefits received and half of AGI over $7,500 (single) or $10,000 (married)
- If married and both are over 65, 15% of $7,500 reduced by nontaxable SS benefits rec’d and half of AGI over $10K
- Claim the credit to the extent of tax liability.
