Unit 11 - Adjustments To Gross Income Flashcards
Qualified educator expenses
How much can be deductible?
What qualifies?
Where is it reported
Also called the “ teacher credit” or the “ educator expense deduction”
Eligible educator can deduct up to $300 of unreimbursed expenses
If both taxpayers are teachers – on a joint return, they can deduct $600
Qualified expenses include :
Books, supplies, computer equipment
Other equipment, supplemental materials, professional development
For courses and health and PE – expenses are deductible only if they are related to athletics
Materials for homeschooling cannot be deducted
Line 11 on schedule 1
How do you qualify as an eligible educator to take the educator expense deduction
Must work at least 900 hours a school year
In a school that provides elementary or secondary education
College and structures do not qualify
Includes a teacher, counselor, principal, classroom roommate, or a school coach
What reduces the amount of qualifying educator expenses?
- Nontaxable US series EE and I savings bond interest income.
- Non-taxable, qualified tuition program earnings or distributions.
- Non-taxable distributions of Coverdell education savings account earnings.
- Any reimbursements received from an employer for qualifying educator expenses.
Business expenses of reservist, performing artist, and fee basis, government officials
Who is eligible
How much can be deductible?
What qualifies?
Where is it reported
Eligible:
Armed forces reserve, National Guard
Performing artist
Government officials paid on a fee basis
No limit deductible
May deduct work related expenses, include mileage, or travel
Form 2106, employee, business expenses, is used to calculate the deduction
And flows through to schedule one line 12 for adjustments to income
HDHP
High deductible health plan
Healthcare savings account deduction
How to qualify
- Taxpayer must not be enrolled in Medicare.
- Cannot be claimed as a dependent on another return.
- Must be covered under a high deductible, health plan and have no other health coverage other than for a specific disease or illness.
Healthcare savings account deduction
Who can contribute?
Maximum contributions…
What distributions are tax deductible?
Penalties
Both an employee and employer can contribute, and go towards the maximum amount
Maximum contribution for self only is $3850, family is $7750
55 and over can contribute an extra $1,000 as catchup contribution
Contributions over these limits are subject to a 6% penalty
Distributions that pay for allowable medical expenses are tax deductible
Also include over-the-counter medication’s without a prescription as well as menstrual products
Withdrawals not used for qualifying medical expenses are subject to income tax and may also encourage 20% penalty , except for taxpayers age of 65 and older, permanently, disabled or dies
Health savings account deduction
How is it reported to the taxpayer?
Where is it reported on the tax return
Tax will receive annual form 5498 – SA FROM THE HSA TRUSTEE
THE DEDUCTION FOR AN HSA IS REPORTED ON FORM 8889 – HEALTH SAVINGS ACCOUNTS
- deduction amount on schedule 1 line 13
Contributions must be made on or before that years tax filing date to be claimed
HSA vs Healthcare FSA
HSA is always paired with a high deductible health plan
HSA funds belong to the participant, not the employer
HSA funds do not expire from year to year
To qualify for health savings account deduction… as a HDHP
HDHP minimum deductible
HDHP maximum out of pocket amount, not including insurance premiums
Minimum deductible
Self only $1500
Family $3000
Maximum amount of pocket amount
Self only $7500
Family $15,000
Moving expenses for members of the armed forces
What can be deducted?
How is it reported?
Includes cost of moving themselves, their spouse, dependence, pets, and household goods
Any expenses, reimbursed by the government cannot be claimed as a deduction
Standard mileage rate for moving expenses is $.22 per mile
Form 3903, moving expenses – used to calculate qualifying moving expenses for armed forces personnel
And the amount deductible is reported on schedule one line 14
Moving expenses for non-US service members
If an employer pays for moving expenses or reimburses an employee for moving expenses…
The amount needs to be included on form W-2 and the entire amount is subject to payroll tax .
Taxable to the employee as wages
Deductible part of self-employment tax
How is it calculated?
Where is it reported?
Self-employed taxpayer can reduce their income 50% of their self-employment tax - equal to the employer share
The deduction is figured on schedule SE
Amount deductible reported on schedule one line 15
Cannot deduct 1/2 of the additional Medicare tax on earned income
Self-employed tax deductible, retirement plans
What are they?
Where are they reported?
What qualifies?
Self-employed individuals can deduct contributions to the following types of retirement plans
Simplified employee pension (SEP) plans
Savings incentive match plan for employees (SIMPLE) plans
Qualified plans – such as 401(k)
Deductible contribution is Reported on schedule one line 16
A self-employed taxpayer must have qualifying income, show a TAXABLE profit AFTER DEFUCTIONS, to contribute to their own plan
But does not need to show a profit on schedule to contribute to a retirement plan for their employees
Self-employed health insurance deduction
How to qualify?
What insurance qualifies?
Who qualifies
How much is deductible and how is it calculated?
Where is it reported?
What disqualifies the deduction
The taxpayer must either:
- be self-employed and have a net profit for the year
- be a partner and a partnership with earnings from self-employment
- have received wages from an S corporation in which the taxpayer was a more than 2% shareholder
Taxpayer may be able to deduct 100% of their health insurance premiums, including long-term care, insurance and Medicare premiums
Includes premiums paid for a spouse and dependence under age 27
The deduction is limited to the net profits from the business on schedule C
The tax deductible amount is reported on schedule one line 17
If eligible to join an employer, sponsored and subsidized health insurance plan – they are no longer eligible for the health insurance deduction even if they decline
