R2-Individual Tax - Adjustment, Deduction, and Credits Flashcards
Can you take all Adjustments?
Yes, you ALWAYS take every adjustment.
Adjustment/Itemized Deduction - What is above & below the line.
Adjustment is above the line (AGI). Itemized Deductions are below the line.
Educator Expense - Adjustment or Itemized Deduction?
Adjustments
IRA - Adjustment or Itemized Deduction?
Adjustments
Student Loan Interest Expense - Adjustment or Itemized Deduction?
Adjustments
Tuition and Fee Deduction - Adjustment or Itemized Deduction?
Adjustments
Health Savings Account - Adjustment or Itemized Deduction?
Adjustments
Moving Expenses - Adjustment or Itemized Deduction?
Adjustments
One-Half Self-Employent FICA - Adjustment or Itemized Deduction?
Adjustments
Self-Employment Health Insurance - Adjustment or Itemized Deduction?
Adjustments
Self-Employment Retirement - Adjustment or Itemized Deduction?
Adjustments
Interest Withdrawl Penalty - Adjustment or Itemized Deduction?
Adjustments
Alimony Paid - Adjustment or Itemized Deduction?
Adjustments
Attorney Fees Paid in Certain Discrimination/Whistleblower Cases - Adjustment or Itemized Deduction?
Adjustments
Alimony Paid - Adjustment or Itemized Deduction?
Adjustments
Domestic Production Activity Deduction - Adjustment or Itemized Deduction?
Adjustments
What is a deduction to arrive at adjusted gross income
Adjustments
Are One Half Self Employment FICA, Self-Employed Health Ins., and Self Employed Retirement deducted at Schedule C?
Not Deducted on Schedule C
What is a deduction after adjusted gross income
Itemized Deduction / Standard
How much can an eligible educator deduct? Single? Married?
$250 Single / $500 Marries
What are the 4 types of IRA’s?
Deductible IRA (standard), Nondeductible IRA, Roth IRA, Coverdell Education Savings Account (IRA)
Are earnings accumulated taxed for Deductible IRAs? Withdrawn?
Earnings accumulate tax-free. Withdraws are taxed at Ordinary Income.
When are you not permitted to deduct a contribution to an IRA?
Excessive AGI & Active Participant in Another Plan
What is the income limit for Deductible IRAs Single & Married?
$60-70K for Single/HoH and $96-116K for Joint.
If make $1,000,000 and not in Company Pension Plan. Can you take an IRA?
Yes, because it is Excess AGI AND active participant in Another plan
What is the exception to the Active Participant in Another Qualified Plans for IRA’s?
Not considered an active participant simply because Wife if an active participant.
What is the phase out for Deductible IRA for individuals who are not active participants, but whose spouse is?
$181-$191K. H & Wife tested individually unless “Super Rich”
What is the deductible amount of a regular IRA/ Roth IRA / Coverdell?
$5,500 or Individual’s Compensation (2014) – $2,000 annually per beneficiary
What is the deductible amount of a regular IRA/ Roth IRA / Coverdell for Married Couples?
$11,000 ($5,500 each spouse)
Name a few things that does not inclue compensation?
Interest, Dividends, Annuity Income, and Pensions.
What is Additional Catch-Up Contribution ? How Much?
Individuals over 50 can additionally contribute (adjustment) of $1000
How is a Roth IRA taxed?
No Tax Impact Now or Later.
What is the Phase-Out Income Limits for Single? Joint? And Married Filing Sepertely for Roth IRA’s?
$114-129K for Single; $181-191K for Joint Filing; $0-10K for Married Filing Sepertely
What is the difference between Deductible and Nondeductible IRA?
The Principle Contribution is Nontaxable.
Why would anyone want a Nondeductible IRA?
Last Resort. Ex. $1M income and Pension Plan.
What is the Maximum Tuition and Fees deduction? Above or Below the Line?
$4,000 - Above the line.
Does the education have to be Work-Related if Tuition and Fees Deduction to be valid?
No. It can be any class.. Photography, Math, etc.
What happens if you exceed your Maximum Limit for Tuition and Fees Deduction?
Expenses above the maxiumum are only deductible as education expenses.
What is the Phase Out Rule for Tuition and Fees Deduction?
$4K for AGI up to $65K Single/$130K Joint.. $2K for $65-80K/160K joint… No Adjustment in excess of $80K / $160K Joint.
What are Health Savings Accounts?
Pretax contributions to those with High Deductible Heaht Insurance ($3,300K for Single/ $6,550 for Family). No Contribution for Medicare Part A or B members
Do Moving Expenses have to be Work Related?
Yes
What is the only employee (not Self) deduction above the line?
Moving Expenses. Everything is Itemized
What are the rules for taking Moving Expenses as a deduction?
New Workplace has to be 50miles away; Must be Employed Full Time 39 out of 52 weeks (75%), and only Direct Moving Expenses (moving household goods, lodging, etc)
What are nondeductible Direct Moving Expenese?
Meals, Prehouse House Hunting, Expense of Breaking a Lease, and Temporary Living Expense.
What 3 above the line deductions are not allowed on Schedule C?
Tax on Self Employment (50%), Self-Employment Health Insurance (100%) and Keogh Profit Sharing Plan.
What is the Maximum Annual Deduction Amount for Keogh Plans
$52K or 25% net (Keough/Self Empl) earnings
What is the Maximum Annual Deduction Amount for Keogh Plans
$52,000 or 100% net earnings (if comp is less than $52K.
What is the Keogh Net Earnings Formula?
Business Income - Business Expense = Net Business Income - 1/2 Social Security Tax - Keough Deduction = Keogh Net Earnings x 25%
What is Penalthy on Early Withdrawl of Savings (Interest Income) - Interest Forefeited
Early Withdrawl of savings funds in a C.D. before Maturity. DO NOT NET AGAINST INTEREST INCOME.
What are the rules for Alimony/Spousal Support?
Legally Required, Must be in Cas, Cannot Extend Beyond Death, Cannot be made to other members of home, Not be designated as anythign else, Must not file jointly.
Child Support (Nontaxable to ______ / Nondeductible to _____)
Nontaxable to Payee / Nontaxable to Payor.
Property Settlements (Nontaxable to ____ / Nondeductible to ______)
Nontaxable to Wife .. Nondeductible to Husband
What is the Additional Deduction for those who take Standard Deduction? For Whom?
Elderly or Blind - this is an ADDITIONAL deduction, not an additional exemption
What is the Limitation of Itemized Deduction?
If your AGI is about 250K or so… Reduced by 3% by which the taxpayer AGI exceeded amts. Itemized Deductions may not be reduced below 80% of amt before phaseout.
What are the 4 items that are not a part of the Phase Out for Limitation of Itemized Deduction?
Gambling Loses, Investment Interest Expense, Medical Expenses, and Casualty/Theft (non business). G.I.M.C. - Gimmick. Always allowed 100%
Itemized Deductions go under Scheduld ___ for Personal? Schedule ___ for Business? Schedule ____ for Rental
Form 1040 Schedula A for Personal - Schedule C for Business - Schedule E for Rental.
What are the list of items listed under Itemized Deduction for its respective Schedule?
Medical, Taxes, Interest, Charity, Casuality, Misc.
When can’t you claim ‘Mom’ as a dependent. Widow, Pay all expenses, etc?
When she makes too much taxable income?
If mom makes too much taxable income and can’t claim her as a dependent, but we pay all of her medical expenses? Can we claim her
Yes, you can claim. Dependent for Medical Itemized Deductions does not consider dependent gross income.
Can you claim Medical Expenses for Pets?
No
When can you claim Medical Expenses as Itemized Deduction.
When Paid (Cash or Check) or Charged (Credit Card) even if not ‘paid’ till next year)
Qualified Medical Expenses to the extent they exceed Medical Insurance Reimbursement and_____ of AGI are deductible
10% of AGI.
Medicine & Drugs - Deductible or Nondeductible Medical Expense?
Deductible Medical Expense
Doctors - Deductible or Nondeductible Medical Expense?
Deductible Medical Expense
Medical and Accident Insurance - Deductible or Nondeductible Medical Expense?
Deductible Medical Expense
Transportation to Medical Facility - Deductible or Nondeductible Medical Expense?
Deductible Medical Expense
Physically Handicapped Costs - Deductible or Nondeductible Medical Expense?
Deductible Medical Expense
Elective Surgery - Deductible or Nondeductible Medical Expense?
Nondeductible Medical Expense (cosmetic surgery due to accident or deformity can qualify)
Life Insurance - Deductible or Nondeductible Medical Expense?
Nondeductible Medical Expense
Capital Expenditure - Deductible or Nondeductible Medical Expense?
Nondeductible Medical Expense (Up to Increase in FMV of Propery beciase of the Expenditure)
Gym Membership Recommended by Dr for General Health - Deductible or Nondeductible Medical Expense?
Nondeductible Medical Expense (more specific for it to be deductible)
Personal Hygiene and other personal items - Deductible or Nondeductible Medical Expense?
Nondeductible Medical Expense
Medical Cost of Installing wheelchair to go upstairs cost $10K and improved value of home by $1. How much is deductible
$9K
How do you treat Insruance Reimbursements when dealing with Medical expenses?
Amt repaid to taxpayer by hospital, health, or accident insurance must reduce otherwise allwoable expenses (before 10% of AGI is applied)
Medical Expenses to the extent they exceed ____ of taxpayers AGI are or are not deductible?
Medical Expenses to the extent they exceed 10% of taxpayers AGI are deductible
For Whom is State, Local, and Foreign Taxed generally deductible?
Cash-Method Taxpayers. NOT Federal Income Taxes
Real Estate Taxes - Deductible or Nondeductible State/Local/Foreign Tax?
Deductible Tax
Income Taxes - Deductible or Nondeductible State/Local/Foreign Tax?
Deductible Tax
Persoanl Perperty Taxes (State and Local Taxes) - Deductible or Nondeductible State/Local/Foreign Tax?
Deductible Tax
Sales Tax (as of 12/31/2013) - Deductible or Nondeductible State/Local/Foreign Tax?
Deductible Tax
Federal Income Taxes (includes Social Security) - Deductible or Nondeductible State/Local/Foreign Tax?
Nondeductible Tax
Inheritance Taxes for States - Deductible or Nondeductible State/Local/Foreign Tax?
Nondeductible Tax
Federal Estate pick-up Tax - Deductible or Nondeductible State/Local/Foreign Tax?
Nondeductible Tax
Business (on Schedule C) Tax - Deductible or Nondeductible State/Local/Foreign Tax?
Nondeductible Tax
Rental Property Tax (on Schedule E) Tax - Deductible or Nondeductible State/Local/Foreign Tax?
Nondeductible Tax
What is H I P P E in Interest Expense?
Home - Interest - Personal - Prepaid - Education
What are the 7 things that you need for Real Estate Taxes to be Deductible?
- Must be legally obligated to pay. 2. Prorated taxes in year of sale/puchase. 3. Taxes Paid under Protest (recovery is G.Inc) rest is R2-20
Do Real Estate Taxes include Street, Sewer, Sidewalk Assessment?
No. No Special Assesment.
If you pay backtaxes on state taxes… When do you claim deduction? Now or different year?
Now. Deduct in year paid NOT in year it applies to.
Can you deduct state and local income tax and state and local general sales tax?
No. You must take one OR the other. Deduct State and Local INCOME OR State and Local SALES Tax, – Income Tax or State Sales Tax
What are the 3 Nondeductible Taxes?
F. I. B. - Federal Taxes - Inheritance Tax for States - Business (on Sch C)
Home Mortgage Interest - Deductible or Nondeductible Interest Expense?
Deductible - Allowed for Qualified Residence Interest on 1st or 2nd home (1M for Married. $500K for MFS).
Investment Interest - Deductible or Nondeductible Interest Expense?
Deductible - Limited to Net (Taxable) investment Income
Personal Interest - Deductible or Nondeductible Interest Expense?
Not Deductible
Prepaid Interest - Deductible or Nondeductible Interest Expense?
Deducted when Incurred AND Paid
Educational Interest - Deductible or Nondeductible Interest Expense?
Education Loan Interest is an Adjustment, not an itemized deduction. - Max $2,500. Excess is not allowed.
How many days must a 2nd home be used for personal purposes to be counted as a 2nd Home
14 days
What are the two categories of qualified residence interest as a deductible interest expense?
Acquisition Indebtedness ($1M. $500K MFS maximum) and Home-Equity Indebtness ($100K/ $50 MFS maximum)
The investment interest deduction for individuals is limited to _____ (taxable) investment cincome.
The investment interest deduction for individuals is limited to net (taxable) investment income. Like Gambling Loss Rules.
What is excluded as Investment (Taxable) Income?
Interest expense used to purchase tax-free bonds is not deductible. No Negative Dollars allowed as Deduction
Charitable Contributions - Which are Tax Deductible? Charity - Gifts - Political Contributions
Charity is Tax Deductible – Gifts & Political Contributions are nondeductible.
What is the deductible amount for Charitable Contributions?
Cash or FMV.
What is the maximum allowable deduction for Charitable Contribution?
Overall limit 50% – 50% of AGI for Cash – Lesser of basis or FMV for AGI for general property – 30% for L-Term Appreciated Proprery
If you bought a charitable raffle ticket - Is it a charitable deduction?
No
If you paid $200 for a ticket to a ball who’s value was $50 - Is it a Charitable Deduction?
$150
When is the deduction allowed for Charitable Contributions for Cash/Check/Credit Cards?
When Paid for Cash or Check. When Charged for Credit Card
Can you deduct the value of time or services donated to Charitable Contributions?
No’
If I gave away more than 50% of AGI for Charitable Contribution.. Can I carry over?
Yes - Charitable Contributions Carryovers are applied on a first-in, first-out basis.
Casualty and Theft Losses are deductible? How Much?
Yes - 10% of AGI.
What are some Miscellaneous Itemized Deduction? What are the rules for them
These are only taken if the combined exceed 2% of AGI and were not taxen as an exemption
What is the ‘Adjustment’ for Unreimbursed Business Expenses?
Only Moving Expenses are adjustments. Everything else is Misc Itemized Deductions
What are some Itemized deductions for Unreimbursed Business Expenses for Employees?
Travel, Meal, Lodges (Self Empl on Sch C). - Transportation Expenses (100%) - Meals/Entertainment (50% deductible)
When can you claim an educational expense as an Itemized Deduction? When are you disqualified
Qualified to main or improve skills needed for job. Disqualified if they were needed to meet minimum job requirements.
Are uniforms an Miscellaneous Itemized Deduction for Business Expenses
Yes.
Are Business Gifts an Miscellaneous Itemized Deduction for Business Expenses
$25 per receipent per year
Are Business Use of Home an Miscellaneous Itemized Deduction for Business Expenses
Yes, for part of home exclusively used for work
Are Employement Agency Fees an Miscellaneous Itemized Deduction for Business Expenses
Yes for looking for a new job in the same profession. Not deductible for first job or new profession
Are Expenses of Investors (Safe Deposit Box/Inv. Advice) an Miscellaneous Itemized Deduction for Business Expenses
Yes.
Are Subscription to Professional Journals an Miscellaneous Itemized Deduction for Business Expenses
Yes
Are Tax Preperation Fees an Miscellaneous Itemized Deduction for Business Expenses
Yes for taxpayers return. No for divorce, unless related to tax planning aspects or pursuing taxable income
Are Debit Card Convenience Fees an Miscellaneous Itemized Deduction for Business Expenses
Yes the year they were incurred
Is there a deduction for Activites not engeined in for profit (hobbies)
No Deduction
Are Gambling Losses fully deductible as Other Miscellenous Deductions? Subject to 2% of AGI?
Fully Deductible. Not subject to 2% of AGI
Are Federal Estate Tax Paid on Income for Descentent fully deductible as Other Miscellenous Deductions? Subject to 2% of AGI?
Fully Deductible. Not subject to 2% of AGI
