R2Pt1- AGI/Itemized Ded. Flashcards
How are capital losses applied in individual taxes?
$3,000 net capital loss can be taken in each year, the rest is carried forward indefinitely.
The loss retains its character (STCL or LTCL).
On an individual return, regular mortgage interest on what loan amount is deductible?
$1,000,000
Interest on home equity loans up to what amount are deductible on an individual tax return?
$100,000
What amount of business start-up costs can be deducted? How is it expensed?
Up to $5,000
Amortized over 180 months
Reduced dollar-for-dollar by amount over $50,000
How are medical expenses deducted on a 1040 for Taxpayers under 65?
On Schedule A:
Amounts in excess of 10% of AGI may be deducted
Under what circumstances can medical expenses paid on behalf of another be deducted on someone’s Schedule A?
Must be a citizen of North America
Must live with you, or if they do not, must be mother/father or a relative closer than a cousin.
Benefactor must provide more than 50% support to the beneficiary.
Which foreign taxes are deductible?
- Foreign INCOME
& - REAL ESTATE taxes are deductible.
How is net investment income calculated, for the purpose of deducting excess investment interest expense?
Gross investment income
(Investment Exp. in excess of 2% of AGI)
= Net Investment income
Investment interest expense in excess of net investment income is deductible.
What investment interest is never deductible?
Investment interest expense on tax-free securities is not deductible.
When are mortgage points deductible and how are they deducted?
They are deductible if they represent prepaid interest on purchase of a new home or improving a home.
Refinance points are amortized over the life of the mortgage.
How are charitable contributions of Long-Term property and property related to a charity’s function deducted?
Deducted at fair market value (FMV), up to 30% of AGI
How are charitable donations for Short-Term property and property not related to the charity’s function deducted on Schedule A?
Deduction is taken for adjusted basis in the property, up to 50% of AGI.
Does a casualty loss affect the basis of property?
No. It decreases the fair market value (FMV) of the property.
What is the first step to find “Gross Loss” for the Calc. of Causality Loss?
Take the Lower of either:
- Decrease in FMV
OR
-Basis in property
At what rate is self-employment tax assessed?
15.3% of net earnings from self-employment
Note: executor of an estate is NOT self-employment income
How is the deductible portion of a casualty loss calculated?
GROSS LOSS (Insurance Proceeds Received) ($100) (10% of AGI) = Deductible casualty loss
How much can Eligible Educators Deduct of qualified expenses?
- Up to $250
- For Spouses: Max. deduction- $500
What Grade levels & Hours is considered a Eligible Educator?
- Kindergarten through 12th Grade
& - For at least 900 hours
For Individual Retirement Accounts; How are Earnings & Withdrawals Taxed?
- Earnings= Tax Deferred
(accumulation- tax free) - Withdrawals= Taxable as Ordinary Income
(subject to penalties)
A taxpayer will not be permitted to deduct a contribution to an IRA when both are met?
- Excessive AGI
- Active Participation in another Qualified Plan
What is the Exception for Deduction to Active Participation in another Qualified Plan?
- Not considered an Active participant when Spouse is the Active participant.
What is the Phase-Out for Deduction to Active Participation in another Qualified Plan when Spouse is?
- When taxpayer’s with Modified AGI is between $178k-$188k.
- Each spouse tested separately unless hits threshold- ‘Super Rich’
The Maximum Deduction for IRAs a Single Taxpayer can deduct from Income is the LESSOR of:
- $5,500
OR - Individual Compensation
The Maximum Deduction for IRAs Married Taxpayers can Deduct from Combined Income is the LESSOR of:
- Combined Income
OR - $11,000
