REG 2 Flashcards
What is the additional medicare tax from the Affordable Care Act?
Additional 0.9% Medicare tax withheld on wages above $200,000 ($250,000 MFJ, $125,000 MFS)
Should employers pay FICA tax for household employees?
Yes, employer must pay FICA tax if paid more than $2,300 in 2021
What is net investment income tax?
Investment income in excess of allowed deductions.
Subject to tax equivalent to the Medicare tax rate of 3.8%
What is the self-employment tax?
Imposed on net earnings from self-employment at twice the FICA rate for employers.
What are the various FICA taxes?
Are IRA contributions deductible?
Contributions to a traditional IRA are deductible (limit $6,000).
Contributions to a Roth IRA are not deductible
What are medical and dental expenses?
Medical and dental expenses are itemized deductions in excess of 7.5% of AGI. The following expenses are included:
- For diagnosis, cure, mitigation, treatment, or prevention of any disesase.
- Transportation for medical care
- Medical insurance
- Qualified long-term care premiums, services
What is the charitable contribution for individuals who do not itemize?
Below the line deduction of up to $300 ($600 if MFJ)
What is qualified residence interest?
Below the line deduction. Can deduct no more than $750,000 of the sum of acquisition and home equity indebtedness that is secured by a qualified residence.
What types of charitable contributions property are subject to the 50% limit? Itemized deduction for individuals.
What is the qualified business income (QBI) deduction? Section 199A.
The deduction for QBI is 20% for QBI generated by a sole proprietorship, partnership, or S corporation. The deduction is the lesser of:
- 20% of QBI
- 20% of (Taxable income - net capital gains)
What does qualified business income include?
Qualified business income (QBI) is defined as the ordinary income less ordinary deductions a taxpayer earns from a qualified trade or business. It also includes the distributive share of these amounts from each partnership or S corporation interest held by the taxpayer
Qualified business income does not include certain types of investment income, such as:
* Capital gains or capital losses;
* Dividends;
* Interest income (unless “properly allocable” to a trade or business, such as lending);
* Certain other investment items
* The “reasonable compensation” paid to the taxpayer with respect to any qualified trade or business, or
* Guaranteed payments made to a partner
What are refundable tax credits?
- Taxes withheld
- Earned income credit
- Child tax credit
- Credit for other dependents
- Child and dependent care credit
- American opportunity credit
- Premium tax credit
How do you calculate the Earned Income Credit?
What is a qualifying child for the Earned Income Credit?
Three tests must be met:
* Relationship - the child must be related by birth, adoption, eligible foster child, or stepchild.
* Residency - the child lives with taxpayer for more than 6 months
* Age - Child must be under 19, be permanently disabled, or student under age 24
What is the shareholder treatment of distributions from an S corporation?
