SU # 5 - Deductions from AGI, Credits, AMT & Limitations Flashcards
5.2 - Job Expenses & Misc Deductions
Itemized Deduction Limitation:
What is the reduction for high income tax payers that must reduced aggregate amount of itemized deductions?
Lesser of 80% of allowable itemized eductions or 3% of amount by which AGI exceeds threshold
5.2 - Job Expenses & Misc Deductions
Itemized Deduction Limitation:
By what amount must AGI exceed before the itemized deduction is reduced for MFJ filers?
$311,300
5.2 - Job Expenses & Misc Deductions
Itemized Deduction Limitation:
By what amount must AGI exceed before the itemized deduction is reduced for HOH filers?
$285,350
5.2 - Job Expenses & Misc Deductions
Itemized Deduction Limitation:
By what amount must AGI exceed before the itemized deduction is reduced for Single filers?
$ 259,400
5.2 - Job Expenses & Misc Deductions
Itemized Deduction Limitation:
By what amount must AGI exceed before the itemized deduction is reduced for MFS filers?
$ 155,650
5.2 - Job Expenses & Misc Deductions
Business Expenses:
When are reimbursed business expenses excluded from income?
When they are substantiated — deductions subject to 2% of AGI are allowed for unsubstantiated reimbursed business expenses
5.3 - Tax Credits
Elderly or Disabled Credit:
How is the elderly or disabled credit calculated?
15% of the reduced initial base amount
5.3 - Tax Credits
Elderly or Disabled Credit:
Identify the items that reduce the initial base amount
- tax exempt SS benefits
- excluded pension or annuity benefits
- disability income if less than 65 years old
- 1/2 the excess of AGI over
- $ 7,500 Single
- $ 10,000 MFJ
- $ 5,000 MFS
5.3 - Tax Credits
Elderly or Disabled Credit:
What is the initial base amount for filers who are Single, MFJ (both 65+) and MFS?
- $5,000 Single
- $7,500 MFJ (both 65+)
- $3,750 MFS
5.3 - Tax Credits
Lifetime Learning Credit:
What is the AGI phaseout for the Lifetime Learning Credit?
- $55,000 - $65,000 Single
- $110,000 - $130,000 MFJ
5.3 - Tax Credits
Lifetime Learning Credit:
Calculate the Lifetime Learning credit for single filers of the AGI phaseout
Amount of credit allowed * (($ 65,000 - MAGI) / $10,000)
5.3 - Tax Credits
Lifetime Learning Credit:
Calculate the Lifetime Learning credit for MFJ filers in the AGI phaseout
Amount of credit allowed * (( $ 130,000 - MAGI) / $ 20,000)
5.3 - Tax Credits
Work Opportunity Tax Credit:
What is the amount of the WOTC (work opportunity tax credit)?
- 40% of the 1st $ 6,000 of wages paid to a qualified employee in his/her 1st year of service
- $10,000 for Long Term Family Assistance Recipients
- $3,000 for Qualified Summer Youth Employees
5.3 - Tax Credits
Work Opportunity Tax Credit:
What are the employee requirements to be eligible for the Work Opportunity Tax Credit?
- work at least 400 hours
- Reduced to 25% for employment of 120+ hours but less than 400 hours
5.3 - Tax Credits
Work Opportunity Tax Credit:
Identify the “max credits” for the WOTC?
- $2,400 certain targeted groups
- ($6,000 * 40%)
- $4,000 LT Family Assistance Recipients
- $ ,10($10,000 * 40%)
- $1,200 Qualified Summer Youth Employees
- ($3,000 * 40%)
5.3 - Tax Credits
Work Opportunity Tax Credit:
What is the 2nd year credit for LT Family Assistance Recipients?
- $5,000 — 50% of 1st $10,000
5.3 - Tax Credits
Work Opportunity Tax Credit:
What is the max credit for both years in the aggregate for LT Family Assistance Recipients?
- $9,000 max credit for both years in the aggregate
- ($4,000 first year + $5,000 second year)
5.3 - Tax Credits
Work Opportunity Tax Credit:
Idenitfied qualified wages for the WOTC?
- Remuneration for employment
- Funds received from accident & health plans
- Employer contributions to accident & health plans
- Educational assistance
- Dependent care expenses
5.3 - Tax Credits
Earned Income Credit:
What are the 3 Earned Income Credit qualifications for an individual who does not have a qualifying child?
- U.S. principal residence
- Greater than ½ the tax year
- At least age 25 and not over 64 years’ old
- Not a dependent of another person
5.3 - Tax Credits
Earned Income Credit:
Identify the 7 qualifications for the Earned Income Credit
- Valid SS#
- Earned income from employment
- Not use MFS status
- Be a U.S. citizen or resident alien
- Must not be a qualifying child of another person
- AGI & earned income less than statutory thresholds
- Investment income below annual threshold of $3,400 for 2016
5.3 - Tax Credits
Adoption Credit:
What is the max credit for the Adoption Credit?
$ 13,460
5.3 - Tax Credits
Adoption Credit:
What is the phaseout for the adoption credit?
- MAGI greater than $201,920
5.3 - Tax Credits
Adoption Credit:
At what income level is the adoption credit completely phasedout or unavailable?
- Not available if MAGI = or greater than $241,920
5.3 - Tax Credits
Adoption Credit:
Is the unused adoption credit carried forward? If so, what is the statute of limitations?
Yes - carried forward for up to 5 years >> not subject to MAGI phaseout
5.3 - Tax Credits
American Opportunity Credit:
What is the computation for the American Opportunity Credit?
- 100% first $2,000 expenses +
- 25% second $2,000 expenses
5.3 - Tax Credits
American Opportunity Credit:
What is the AGI phaseout for the American Opportunity Credit?
- AGI Phaseout:
- $80,000 - $90,000 all other filers
- $160,000 - $180,000 MFJ
5.3 - Tax Credits
American Opportunity Credit:
What is the AGI phaseout calculation for the American Opportunity Credit?
Amount of credit allowed * ((AGI - $ 80,000 or $ 160,000 MFJ) / $ 10,000 or $ 20,000 MFJ)
5.3 - Tax Credits
Child / Dependent Care Credit:
How much is the child & depdendent care credit?
35% of expenses limited to $ 3,000 for one child and $ 6,000 for 2 or more children
5.3 - Tax Credits
Child / Dependent Care Credit:
What is the credit available to taxpayers with AGI over $43,000?
20% credit
5.3 - Tax Credits
Child / Dependent Care Credit:
What is the reduction for the child / dependent care credit?
- Reduced by 1% but not below 20% for each $2,000 by which AGI exceeds $15,000
5.3 - Tax Credits
Child / Dependent Care Credit:
Calculate the % reduction for the child / dependent care credit
excess AGI / 2,000 = % reduction
5.3 - Tax Credits
Child Tax Credit:
How much is the child tax credit?
$ 1,000 per qualifying child
5.3 - Tax Credits
Child Tax Credit:
What is the AGI phaseout for the child tax credit?
- $110,000 MFJ
- $55,000 MFS
- $75,000 Single, HOH
5.3 - Tax Credits
Child Tax Credit:
What is the credit reduction for the child tax credit?
- Credit reduced by $50 for each $1,000 MAGI above thresholds
AMT Preference Items:
Identify the most common tax preference items for AMT purposes
- Tax exempt interest on private activity bonds
- Issued after 1986 but not 2009 & 2010
- Excess depletion
- Drilling costs
- Small business stock exclusion
- Purchased prior to 9/28/2010 or after 12/31/2015
- 7% of excluded gains would be added back to AMTI
- Intangibles
AMTI Formula:
What is the formula to calculate AMTI?
Taxable income
+ Tax preferences
+ Personal exemptions
+ STD deduction if not itemizing
+ / - Certain other adjustments
= Alternative Minimum Taxable Income
AMT Adjustments:
Identify the itemized deductions that are denied for AMT adjustments (must be added back to taxable income for AMTI)
- Miscellaneous itemized deductions
- State, local and foreign income taxes
- Real and personal property taxes
- Other adjustments not allowed
- STD deduction
- Personal exemption
AMT Formula:
Calculate AMT base
Alternative Minimum Taxable Income (AMTI)
- Exemption Amount
= AMT Base
AMT Formula:
Calculate tentative minimum tax (TMT)
AMT base
* AMT rate
= TMT
AMT Formula:
Calculate AMT
TMT
- Regular Income Tax
= AMT
AMT Formula:
Identify the AMT tax rate and the associated income limit for that rate
26% for the 1st $ 185,400 MFJ or $ 92,700 MFS
AMT Formula:
Identify the AMT tax rate for excess income and the associated income limit for that rate
28% rate for all income over $ 185,400 MFJ or $ 92,700 MFS
AMT Formula:
Identify the exemption amount & phaseout in calculating AMT tax base for MFJ filing status
- $ 83,800
- 25% phaseout for excess over $ 159,700
AMT Formula:
Identify the exemption amount & phaseout in calculating AMT tax base for MFS filing status
- $ 41,900
- 25% phaseout for excess over $ 79,850
AMT Formula:
Identify the exemption amount & phaseout in calculating AMT tax base for Single filing status
- $ 53,900
- 25% phaseout for excess over $ 119,700
5.5 - Losses and Limits
Rental Real Estate Phaseout:
How much of a loss deduction is permitted for active participation in rental real estate?
$ 25,000 can offset active income
5.5 - Losses and Limits
Rental Real Estate Phaseout:
What is the MAGI phaseout for rental real estate loss deduction?
- 50% loss reduction if MAGI in excess of $100,000
- Deduction eliminated if MAGI over $150,000
