Chapter 6 Individual Deductions

What are deductions?

expenses, losses, and other items for which a reduction of gross income is allowed

Expenses, Losses, and other items for which a reduction of gross income is allowed

deductions

What are the three categories for deductions?

directly related to business activity, indirectly related to business activities, subsidies for specific activities

Deductions matter when they are ____ AGI or ____ AGI

for, from

Deductions FOR AGI are ________

always deductible

(T/F) Deductions from AGI are always deductible

false (deductions)

(T/F) Deductions for AGI are always deductible

true (deductions)

Itemized deductions are only deductible when they ______

exceed the standard deduction

(T/F) Itemized deductions are always deductible

false (itemized deductions)

(T/F) It depends on whether the itemized deductions exceeds the standard deduction to decide if they are deductibles

true (itemized deductions)

What are Direct Business Deductions?

the allowance for taxpayers to deduct expenses incurred to generate business income

For an expense to count as a Direct Business Deduction it must…

be directly connected to the business activity, ordinary and necessary, reasonable in amount, and paid/incurred in the tax year

Being directly connected to a business activity, reasonable in amount, ________, and ordinary and necessary qualifies an expense as a ______

paid/incurred in the tax year, direct business deduction

Self-employed taxpayers deduct business expenses ____ AGI

for (self-emplyed)

Schedule C or C-EZ for Direct Business Deductions is a form for (business/farm) revenue and expenses

business

Schedule F for Direct Business Deductions is a form for (business/farm) revenue and expenses

farm

What are Indirect Business Expenses?

expenses that are deductible against reported gross income

Rent, Royalties, and ________ expenses are examples of _______

unreimbursed partnership expenses, indirect business expenses

Indirect Business Deductions are deductible ___ AGI

for

An eligible educator, which is in an indirect business deduction, can deduct up to _____ and _____ if married filing jointly with both partners educators

350, 700

K-12 Teacher, school employee >900 hours in elementary or secondary education are examples of

eligible educators

Under OBBA educators can choose to

deduct expenses as an itemized deduction

If you pay someone alimony before January 1st 2019 you (are/are not) able to deduct for AGI

are

If you pay someone alimony before January 1st 2019 the recipient (is/is not) able to include money in their gross income

is

If you pay someone alimony after your divorce settled in December 31 2018 you (are/are not) allowed to deduct for AGI

are not

If you pay someone alimony after your divorce settled before Dec 31 2018, the alimony (will/will not) be taxed

will not

Depending on day of divorce Alimony is deductible (for/from) AGI

for

Legal expenses are deductible (for/from) AGI

for

Which Legal expenses are deductible for AGI

attorney and court fees in relation to discrimination or civil right actions

Legal expenses that are NOT deductive for AGI include

investments and tax advice/preparation

Qualified Education loans are deductible up to

2500 annually

Medical expenses, taxes, interest, charitable contributions, disaster area casualties and miscellaneous objects are examples of

itemized deductions

Miscellaneous deductions that are subjected to ____ of AGI are itemized deductions

2%

Medical expenses deductions are only allowed when the medical expense exceeds ___ of AGI

7.5%

(T/F) Deductions for medical expenses are allowed ONLY in the tax year expenses are paid

true (medical expenses)

(T/F) Deductions for medical expenses are allowed IN ANY tax year

false (medical expenses)

Taxes are deductible only if

imposed on income or property, paid or incurred in the tax year

Deductions for taxes cannot exceed _____ for singles and _____ for MFS

40400, 20200

Ad Valorem taxes are

based on the value of the item

Texas (does/does not) have an ad valorem tax on vehicles

does not

The registration for a company vehicle is deductible when

portion is allocable to business use

Deductions for real property taxes are portioned between buyer and seller determined by

days in the year each held the property

Items that increase the property value (are/are not) deductible

are not, instead they are added to the basis of the property

Foreign property taxes (are/are not) deductible

are not