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REG > R2Pt1- AGI/Itemized Ded. > Flashcards

R2Pt1- AGI/Itemized Ded. Flashcards

1
Q

How are capital losses applied in individual taxes?

A

$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).

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2
Q

On an individual return, regular mortgage interest on what loan amount is deductible?

A

$1,000,000

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3
Q

Interest on home equity loans up to what amount are deductible on an individual tax return?

A

$100,000

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4
Q

What amount of business start-up costs can be deducted? How is it expensed?

A

Up to $5,000

Amortized over 180 months

Reduced dollar-for-dollar by amount over $50,000

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5
Q

How are medical expenses deducted on a 1040 for Taxpayers under 65?

A

On Schedule A:

Amounts in excess of 10% of AGI may be deducted

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6
Q

Under what circumstances can medical expenses paid on behalf of another be deducted on someone’s Schedule A?

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.

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7
Q

Which foreign taxes are deductible?

A
  • Foreign INCOME
    &
  • REAL ESTATE taxes are deductible.
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8
Q

How is net investment income calculated, for the purpose of deducting excess investment interest expense?

A

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.

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9
Q

What investment interest is never deductible?

A

Investment interest expense on tax-free securities is not deductible.

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10
Q

When are mortgage points deductible and how are they deducted?

A

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.

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11
Q

How are charitable contributions of Long-Term property and property related to a charity’s function deducted?

A

Deducted at fair market value (FMV), up to 30% of AGI

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12
Q

How are charitable donations for Short-Term property and property not related to the charity’s function deducted on Schedule A?

A

Deduction is taken for adjusted basis in the property, up to 50% of AGI.

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13
Q

Does a casualty loss affect the basis of property?

A

No. It decreases the fair market value (FMV) of the property.

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14
Q

What is the first step to find “Gross Loss” for the Calc. of Causality Loss?

A

Take the Lower of either:
- Decrease in FMV
OR
-Basis in property

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15
Q

At what rate is self-employment tax assessed?

A

15.3% of net earnings from self-employment

Note: executor of an estate is NOT self-employment income

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16
Q

How is the deductible portion of a casualty loss calculated?

A 
GROSS LOSS 
(Insurance Proceeds Received)
($100)
(10% of AGI)
 = Deductible casualty loss
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17
Q

How much can Eligible Educators Deduct of qualified expenses?

A
  • Up to $250

- For Spouses: Max. deduction- $500

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18
Q

What Grade levels & Hours is considered a Eligible Educator?

A
  • Kindergarten through 12th Grade
    &
  • For at least 900 hours
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19
Q

For Individual Retirement Accounts; How are Earnings & Withdrawals Taxed?

A
  • Earnings= Tax Deferred
    (accumulation- tax free)
  • Withdrawals= Taxable as Ordinary Income
    (subject to penalties)
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20
Q

A taxpayer will not be permitted to deduct a contribution to an IRA when both are met?

A
  • Excessive AGI

- Active Participation in another Qualified Plan

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21
Q

What is the Exception for Deduction to Active Participation in another Qualified Plan?

A
  • Not considered an Active participant when Spouse is the Active participant.
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22
Q

What is the Phase-Out for Deduction to Active Participation in another Qualified Plan when Spouse is?

A
  • When taxpayer’s with Modified AGI is between $178k-$188k.

- Each spouse tested separately unless hits threshold- ‘Super Rich’

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23
Q

The Maximum Deduction for IRAs a Single Taxpayer can deduct from Income is the LESSOR of:

A
  • $5,500
    OR
  • Individual Compensation
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24
Q

The Maximum Deduction for IRAs Married Taxpayers can Deduct from Combined Income is the LESSOR of:

A
  • Combined Income
    OR
  • $11,000
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25
Q

Are Contributions to a ROTH IRA deductible?

A
  • NO, not deductible when made
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26
Q

Are the Accumulation of Earnings while in a ROTH IRA Tax-Free?

A
  • YES
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27
Q

Are Withdrawals of Principal & Earnings from ROTH IRAs Tax-Free?

A
  • YES to both
28
Q

What is the Contribution limit for Roth IRAs?

A
  • Includes Combined contributions from all types of IRAs
  • Single- $5,500
  • Married- $11,000
29
Q

For Nondeductible IRAs; The Contribution limits are the Lessor of:

A 
- $5,500
OR
- Individual's Compensation
OR
- Limit not contributed to other IRAs
30
Q

Are the Accumulation of Earnings for Nondeductible IRAs Tax- Free?

A
  • Yes, until withdrawn
31
Q

Are the Principal & Earnings from a Nondeductible IRAs Taxed?

A
  • Acc. untaxed Earnings - TAXED

- Principal Contributions- TAX FREE
not deducted when contributed

32
Q

For Coverdell Education Savings Account; What items are Tax-Free?

A
  • Accumulation of Earnings

- Distributions for educ. expenses & time limitation

33
Q

What is the Maximum Coverdell Education Savings Account Contributions per Beneficiary?

A
  • Nondeductible $2,000 annually
34
Q

What is the limit for adjustment for Education loan interest?

A
  • $2,500
    &
  • Any excess or disallowed is ‘Personal Interest’ & Not Deducted
35
Q

Qualified Higher Education expenses ‘above the line’ deduction applies?

A
  • Regardless of whether the educ. is Work-Related.
36
Q

When Qualified Higher Education expenses are above the maximum are only deductible as?

A
  • Education Expenses

- Itemized Deductions subject to 2% of AGI limitation

37
Q

Health Savings Accounts allow people with high-deductible health insurance to make?

A
  • Pre-Tax Contributions to cover costs

- Not allowed when covered by Medicare Parts A&B

38
Q

A Taxpayer can deduct Moving Expenses when?

A
  • Work-Related
  • New Workplace more the 50miles
  • 39wks/75% stay at new location
  • Only Direct Moving Costs are allowed.
39
Q

What items are NOT Deductible for Moving Expenses?

A
  • Meals
  • Pre-Move house hunting
  • Expense of Breaking a Lease
  • Temporary Living Expense
40
Q

What is a Keogh Plan?

A
  • Self-employed taxpayer subject to S/E Tax,

- Profit Sharing

41
Q

The Maximum Annual Deductible amount for a Keogh Plan is the Lessor of?

A
  • 51,000 (indexed for inflation
    OR
  • 25% Net (keogh/S/E) Earning
42
Q

In addition to the Standard Deduction, who else qualifies for additional Deductions

A
  • The Blind OR Elderly, over 65
    Single= $1,500
    Married= $1,200 each
  • The Blind AND Elderly, over 65
    Single= $3,000
    Married= 2,400 Each
43
Q

What 4 items are NOT reduced by Phase-out?

A
  • Gambling Losses
  • Medical Expenses
  • Casualty/ Theft Loss
  • Investment Interest Expense
44
Q

What are the Types of Deductible Medical Expenses?

A
  • Transportation to Medical Facility
  • Physically handicapped costs: Lodging in institution, meals, care.
  • Medicines
  • Doctors
  • Med/Accident Insurance
  • Required Surgery
45
Q

What are the Types of NON-Deductible Medical Expenses?

A
  • Elective Surgery
  • Life Insurance
  • Capital Expenditures
    (less of improvement of FMV of property)
46
Q

What are the 4 Deductible Taxes?

A

State & Local & Foreign:
- Real Estate Taxes & Income Taxes

State & Local Taxes:
- Personal Property Taxes
(Ad Valorem Car included)
- Sales Taxes ( if Income tax hasn’t been deducted)

47
Q

What are the Characteristics of Real Estate Taxes?

A
  • Taxpayer must be Legally obligated to pay
  • Prorate taxes in year of Sale/Purchase
  • Taxes paid under protest are deductible (Recovery included in Gross Income)
  • Do Not Include: street, sewer, etc
48
Q

When are Income Taxes Deductible?

A
  • Estimated Taxes paid during the year
  • Withheld taxes from paychecks during the year
  • Assessments paid during the year for prior year’s tax
49
Q

What are the Nondeductible Taxes?

A
  • Federal Taxes (including Social Security)
  • Inheritance Taxes for States
  • Business (Sch. C)
  • Rental Property (Sch. E)
50
Q

Prepaid Interest is Deducted when?

A
  • Incurred
    &
  • Paid
51
Q

Educational Expenses that were not deducted above AGI are Qualified for Misc. Itemized Deduction IF?

A
  • Maintain or Improve the Skills for Trade or business

- Meet the express requirements of the individual’s employer for Retention of the job.

52
Q

Which foreign taxes are NOT Deductible?

A
  • Foreign personal property taxes
  • Foreign tax assessments
    ~ they are added to the basis.
53
Q

Describe alimony recapture.

A

2nd Year: (3rd year - 2nd year - $15,000)

1st Year:
1st Year Alimony Paid
- Avg alimony paid in 2nd & 3rd years
- $15,000
- Recapture from 2nd year
=1st Year Alimony Recapture

Total Recapture = 1st Year Recapture + 2nd Year
Recapture

54
Q

What are the deductions to arrive at Adjusted Gross Income (AGI) for individuals?

A
  • MSA/HSA contributions
  • Investment penalties for early withdrawal
  • Self-employed medical insurance premiums
  • Self-Employment Tax (approx. 50%)
  • IRA Contributions
  • Student loan interest (can’t be another taxpayer’s dependent)
  • Moving expenses
  • Alimony
  • Tuition - can’t take AOC/Lifetime Learning Credit for same expense
  • Teacher expenses
  • Attorney fees in discrimination lawsuit
55
Q

What are the miscellaneous deductions on Schedule A, and how are they deducted?

A

Deductible in excess of 2% of AGI

Continuing Education (if required to keep your job)
Business travel
50% Meals and entertainment
Union Dues
Tax prep fees
Legal fees to collect alimony
Appraisal fees to value casualty loss of charitable contributions

56
Q

Under a non-accountable plan, any amounts received by an employee from the employer must be reported by the Employer as?

A
  • Part of wages on the employee’s W-2 for the year &

- Subject to income tax withholding.

57
Q

Any Expenses taken against the Gross amount received in a non-accountable plan are considered?

A
  • Misc. deductions
    &
  • Subject to the 2% AGI Limitation
58
Q

The Deduction by an individual taxpayer for interest on investment indebtedness is:

A
  • Limited to the Taxpayer’s Net Investment income for the year
59
Q

Employee’s Unreimbursed Business Car Expense, both incurred & Paid in the same year can be claimed as?

A
  • An Itemized Deduction to the 2% of Adjust Gross Income Floor
60
Q

In a Keogh Profit Sharing Plan, ‘Earned Income” is defined as Net Self-Employment Earnings Reduced by the:

A
  • Deductible Keogh contribution
    &
  • One-Half of the Self-Employment Tax
61
Q

What is the latest date that an IRA contribution can be made in order to qualify as a deduction on the prior yr’s return?

A
  • April 15th
62
Q

When the Deductible investment interest expense is less than the amount paid by the taxpayer, what is the reason?

A
  • The investment interest expense Exceeds Net Investment Income
63
Q

Gross Income Excludes?

A
  • Inheritance

- Proceeds of a lawsuit for physical Injuries

64
Q

An Individual’s Losses on Transactions entered into for personal purposes are deductible only if:

A
  • The Losses qualify as Casualty or Theft Losses
65
Q

Is a Medical Expense deduction for payments made in the current year for medical services received in earlier years allowed?

A

YES

66
Q

How are medical expenses deducted on a 1040 for Taxpayers OVER 65?

A

On Schedule A:

Amounts in excess of 7.5% of AGI may be deducted

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