REG2 Flashcards
List the deductions FOR AGI
Educator expenses, IRA, Student loan interest expenses, Tuition and Fee deduction, Heath savings account, Moving expenses, 50% Self employment FICA, Self employed health insurance, Self employed retirement, Interest withdrawal penalty, Alimony Paid, Attorney fees paid in whistleblower case, Domestic production activities deduction
Which is a deduction FOR AGI: Child support or alimony?
Alimony!
What are the limits on IRA deductions?
The lessor of $5,000 or individual’s compensation; with nonworking spouse, limit is $10,000 provided combined earnings of both spouses total at least that much.
Where a spouse is an active participant in an employer retirement plan, allowable deduction to arrive at AGI is phased out proportionally for modified AGI between $58,000 and $68,000 single or $92,000 and $112,000 MFJ.
What are the limits on nondeductible IRAs?
The lessor of:
- $5,000
- Individuals compensation
- limit not contributed to other regular and Roth IRAs
Earnings on such contributions will accumulate tax-free until withdrawn.
What is the time limit on Coverdell Education Savings Accounts?
Any amounts remaining when the beneficiary reaches the age of 30 must be distributed. Left over funds must be distributed to a beneficiary, taxed, and 10% penalty OR rollover to family member with no penalty.
What are the limits on deductions and contributions to Keogh plans?
They are for self employed taxpayers and their employees. Deductible amount is lessor of:
- 25% of net earnings after Keogh deduction or
- 50% self employment tax or
- $50,000
Max annual contribution may exceed the deductible amount for the year. It is limited to lessor of:
- $50,000 or
- 100% net earnings if compensation < $50,000
Describe the self employed deductions (“adjustments”) FOR AGI
Tax = 50% of self-employment tax
Health Insurance = 100% deductible
What are the requirements for moving expenses to be deductible?
-Must change job sites
-50 mile move from former residence to new job site
-Must work in new location for 39 weeks during next year or 78 weeks if self employed
Note: there is per mile car allowance or actual out-of-pocket amounts
What is the additional deduction for elderly and/or blind?
If 65+ add $1,450 (single or head of household) or $1,150 (MFJ or MFS or qualify widow).
If blind, add same amounts as above.
If both, amounts are $2,900 and $2,300
What taxpayers are not eligible to use the standard deduction?
-One spouse itemizes deductions on a separate return
-Taxpayer is dual-status or non resident
-Taxpayer has short tax year.
It is limited if taxpayer can be claimed on another return, greater of $950 or earned income + $300 up to basic standard amount.
Identify the major classes of itemized deductions
Medical and dental expenses, taxes paid, interest paid, gifts to charity, casualty and theft losses, miscellaneous deductions subject to 2% floor (job expenses, investment expenses, tax prep) and other miscellaneous deductions not subject to 2% floor (gambling losses to extent of winnings)
What are the limitations on medical expenses?
-Medical expenses are deductible to the extent they exceed 7.5% of AGI. Cost of surgery for elective cosmetic reasons is not deductible. Self employed may deduct 100% of medical premiums from gross income. A dependent must meet tests.
Identify the taxes that are deductible as itemized deductions
- Either local sales tax or state and local income tax
- Real estate taxes
- Personal property tax
- Foreign taxes
Identify the types of interest that are deductible and nondeductible
- Qualified residence on principle/second residence subdivided into: Acquisition indebtedness ($1,000,000 limit), Home equity indebtedness ($100,000 limit), points paid on principle residence mortgage loan fully deductible, points paid to refinance capitalized, certain mortgage insurance premiums.
- Interest on loans for investment purposes, limit to net investment income, can carry forward
- Prepaid interest
- Educational loan interest is an adjustment FOR
- Consumer interest NOT deductible
What are the limitations on charitable deductions?
- Overall limit = 50% AGI, cash all 50%
- Long-term capital gain property deduct FMV up to lessor: 30% AGI or remaining amount to reach 50% after cash distribution
- Excess carry forward 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 adj. basis. If total loss, deduction is adj. basis. Aggregate losses are reduced by insurance recovery, $100 per event, and 10% of AGI
Identify some miscellaneous deductions subject to the 2% AGI floor
Unreimbursed business expenses, educational expenses not deducted above AGI, uniforms, business gifts of $25 per person, business use of home, employment agency fees, expenses of investors, subscriptions to professional journals, tax prep fee
Identify some miscellaneous expenses NOT subject to the 2% of AGI floor
Gambling losses and federal estate tax paid on income in respect of decedent
Identify some tax credits
Nonrefundable: foreign, child and dependent care, elderly or disabled, education, adoption, retirement plan contribution, general business
Refundable: child care, earned income, withholding taxes, excess SS paid, long-term unused minimum
What are the child/dependent credit limitations?
Up to 35% of eligible expenditures or $3,000 max ($6,000 for 2+ dependents). Max of $15,000 AGI, reduce by 1% for each $2,000 increment over $15,000 to a min of 20%.
A qualifying child is <13 years old, disabled dependent, or spouse who is disabled.
Describe the tax credit for the elderly or disabled
- Either at least 65 or totally/permanently disabled and has disability income.
- If single or married and only one is over 65, 15% of $5,000 reduced by nontaxable SS benefits received and 50% AGI over $7,500 (single) or $10,000 (married).
- If married and both over 65, 15% of $7,500 reduced by nontaxable SS benefits received and 50% of AGI over $10,000.
State the limitations of the American Opportunity Tax Credit
For the first 4 years of post secondary education is limited to $2,500 as follows: 100% of the first $2,000 in tuition costs and 25% of the second $2,000
What are the eligibility requirements for the retirement plan contribution credit
- At least 18 by close of tax year
- Not full-time student
- Not a dependent
- Income limits apply
State the formula to determine the amount of foreign tax credit
(net foreign income/worldwide taxable income)*US tax liability before credit on worldwide taxable income
Credit is lessor: foreign taxes paid or overall limit
Carry back 1 year and forward 10.
State the limitation of the work opportunity credit
- 40% of the first $6,000 of wages per employee paid during the first year of employment
- 40% of the first $3,000 of certain summer youth
Describe the child tax credit
$1,000 for each qualifying child (CARES but under 17 years old)
Higher-income taxpayers must reduce credit by $50 for each $1,000 that exceeds modified AGI: $110,000 joint, $75,000 single, $55,000 MFS
What are the eligibility requirements for the EIC?
- Live in US for more than half year
- Meet certain low income thresholds
- Not have more disqualified income
- Be between 25 - 65 if no children
- File joint return if married
Name some adjustments for AMTI calculations (PANIC TIMME)
Passive activity losses Acceleration depreciation Net operating loss Installment income of dealer Contracts, %completion vs. completed contract Tax deductions Interest deductions on some home equity loans Medical deductions (limit to >10% AGI) Miscellaneous deductions not allowed Exemptions personal and standard
Name some tax preference items for AMTI calculations
- Private activity bond interest income
- % depletions
- Pre-1987 accelerated depreciation
What credits are allowed against the AMT?
Foreign, adoption, child, contributions to retirement plans, earned income, and small business health care tax credit
What is the statue of limitations for an assessment?
3 yrs from the later of: due date of return or date return is filed
What is the statute of limitations for a refund?
The later of:
- 3 years from the time return filed
- 3 years from due date
- 2 years from the time tax paid
Who must make estimated tax payments?
Those with:
- $1,000 or more tax liability and the withholding is less than lessor of 90% of current year tax OR
- 100% of last years tax (110% if AGI is >$150,000/$75,000 MFS)
