Unit 6 Flashcards
Below The Line Deductions
All deductions that may be subtracted from AGI to arrive at taxable income. Can be either Itemized/Standard/QBID
How to arrive at TAXABLE INCOME
AGI - Itemized/Standard - QBD = Taxable In`come
Itemized Deduction Examples
Medical Expenses Taxes Interest Expense Charity Personal Casualty Amort Prem. on taxable bonds Gambaling Fed Estate tax on income in respect of decedent
Itemized: Medical Expenses amount
Amount paid for expenses >7.5% of AGI can be deducted
Medical Expenses if an institute other than hospital
If reason is availability of medical care furnished by it then meals/lodge are deducitble
Deducible medical expenses for itemization
Excess of cost of permanent improvements over increase in value of property.
glasses dog, ac
Deducitble Medical Expenses for travel
transport if essential for care, can choose actual or .17 per mile (includes moving to warmer climate)
Medical Expenses for lodgeing
up to 50$ per night per individual
Medical expenses premiums
Deductible except if pay specified amount per week . Medicare A - Not deductible
Medicare B - deductible
Decedent Medical expenses
if paid by estate within 1 year of death= deducted on decadents return.,
Itemized Deduction - TAXES kinds
Real Property taxes
Foreign Income taxes
Real Property taxes that are deductible
Stae/local taxes. Taxes held in escrow are deductibel when paid to taxing body.
Registration/vehicle if based on value of car
state/locals/personal property only if actually imposed on annual basis.
Foreign income taxes deducible?
yes if FTC is not claimed
State/Local Taxes deductible?
YEs instead of state income tax
NON deductible taxes
Fed taxes on income/estate/gift/inheritance
State taxes on cigs/gas/gift
Licensing/registration fees on vehicles if based on weight
Itemized: Interest Expense Deductible
No personal interest. Includes: - Investment Interest - Residence Interest - Points Paid
Deductible Investment Interest Expense
Paid/Incurred to purchase property held for investment
Investment Interest Expense Limit
Deductible to extent of net investment income (which is Nonbusiness income from interest/dividends, rents, (does not count if materially participate)
Investment Interest carried?
Forward indefinetly to extend of investment income in coming years.
Residence Interest Deduction LIMIT
<750k of the sum of acquisition and home equity indebtedness. (375mfs). Principle residence + any one other. Loan must be for home or not deducted.
Points Paid Deduction
Prepaid interest, deductibel over term of the loan. . AMounts paid as points are deductible if for principle home, statement clear, computeres as % of loan amount, normal.
Mortgage Insurance Premium Deduction
Can be deducted as interest expense for 2007-2021. PHASE OUT BEGINS AGI <100k. PHASE OUT 110k
Charity Deduction LIMIT
50% of taxpayers AGI, sometimes 30% of 20%. 100% of cash
Charity deduction requirements
Over 250$ need receipt. good quality unless >500$.
Charity Deduction 50% AGI Limit..
Majority. Chruch, education, hospitals. Can be carried forward 5 years
Charity Deduction 30% AGI Limit..
Capital gain property applicable if donor does NOT reduce FMV if donated amount would have been long-term if sold. If reduction then 50%
Non 50% Charity Organizations
Mostly private,
cash 30%
Capital Gain lesser 20% or 30%
other 20%
Charity Services Deductions
value of services is not deductible, but out of pocked expenses are. (tickets deductible for excess of FMV)
Personal Casualty Loss Deductions
Historically can deduct limited amount to nonbusiness theft, fire, storm. BUT 2018-2024 only federally declared disasters.
Personal Casualty loss deduction amounts
only amount of each loss over 100$ deductible. . Only combined amount of all losses over 100 each in excess of 10% of AGI is deductible.
Personal casualty loss deduction prerequisite
Timely file of insurance, Can claim loss to extent of casualty gain if not federally declared disaster.
Personal Casualty Loss calculated on..
Form 4684 and carried over to Schedule A
