Tax Flashcards
Dependent standard deduction
Greater of:
Earned income + $400 (13,850 max) or
$1,250
Kiddie tax
Unearned income over $2,500 taxed at parents tax rate
All earned income taxed at child’s tax rate
Inherited property basis
Basis = FMV at date of death
Long term holding period
Basis of gifted property
Basis same as donors
Except
1) fmv less than basis
2) appreciated property with gift tax paid
Section 1250 gain
Recapture of excess depreciation taxed as ordinary income
AGI
Gross income less deductions
Taxable income
AGI less standard or itemized deductions
Dependent child
Under age 19 or 24 if student
Provided at least 50% of support
Lived in household at least half year
Related party transaction
Sellers loss disallowed
Basis: FMV for loss, sellers basis for gains
Personal Resident Gain exclusion
Own and use home for primary residence for 2 of last 5 years
Single: exclude $250k
Married: exclude $500k
Personal residence exclusion exeptions
1) change in employment
2) change in health
3) unforeseen circumstances
Pro rate exclusion for number of months the requirement was met
Alimony (pre dec 2018)
Alimony paid is deduction
Alimony received is earned income
Alimony (post 2018)
Not deductible, not included in income
section 179 deduction
The Section 179 deduction limit for 2023: $1,160,000 and the
total equipment purchase limit: $2,890,000
equipment over limit will have reduced deduction in amount of excess purchase
DEDUCTION LIMITED TO AMOUNT OF BUSINESS INCOME
Accounting Methods
Cash Basis: recognize income when received (no inventory, only cash transition)
Accrual Basis: recognize income when it is earned (mandatory for purchases and sales of inventory)
Constructive Receipt Doctrine
when income is readily available to the taxpayer, (no subject to limitations or restrictions) is is deemed to be received and should be taxed
Residential Rental Loss Deduction (NonVacation)
Max $25k loss per year for taxpayers with AGI up to $100k
-reduced by $1 for every $2 for AGI between $100k and $150k
EX: AGI of $130k, max deduction would be $10K [(130 - 100 = 30) (30/2 = 15 reduction)]
Vacation Home Rented LESS than 15 days
no gross income and no deductible rental expenses
Mortgage interest and property taxes treated as personal residence
(do not need to report as rental if rented for less than 15 days)
Vacation Home Rented MORE than 14 days
treatment depends on personal use
- if personal use is NOT more than 14 days or 10% of rental days, can deduct ALL expenses
Preference Items for AMT (Increase AMTI)
1) Percent Depletion
2) Intangible Drilling Costs
3) Interest on Private Activity Bonds
Failure to File Penalty
5% per month up to 25%
- if return filed more than 60 days late, min failure to file penalty is $485 or amount of tax due
Failure to Pay Penalty
0.5% per month up to 25%
- if both failure to pay and failure to file both apply, failure to file penalty is reduced by Failure to pay penalty
Property Classes for Depreciation
5 Year: Computers, Autos
7 Year: Office Equipment
27 1/2 year: Residential Rental Property
39 Year: Non-residential real property
Deductible Loss for Casualty Losses
Must be declared a Natural Disaster
Lesser of basis or FMV - insurance coverage - $100 - 10% of AGI
Basis formula for gifted appreciated property
Donors basis + [(appreciation /taxable gift) x gift tax paid]
Medicare contribution tax
Additional tax for investment income
3.8%
Average tax rate calc
Total tax / gross income
