Tax - Ch 4 - 7 (test 2)

For AGI deductions schedule

Schedule 1 Part 2

Student Loan interest

For AGI

Limit of Student Loan Interest

$2500 per return per year

Who does student loan interest include?

Taxpayer, Spouse, and dependents

What is the requirement to take student loans of a dependent?

Dependent at time of loan

Qualified student loan expenses

Tuition, fees, books, supplies, and room and board

Who doesn’t get to deduct student loan interest?

MFS and someone claimed as dependent

Health Savings Account

For AGI

HSA Def

Tax exempt savings account for health

Who gets HSA deduction?

Self-employed and high-deductible health plans

Moving Expenses

For AGI

Who can take moving expense deductions?

Active military

Half of Self-employed tax

For AGI

Social Security tax %

6.2%

Medicare tax %

1.45%

Why does the self-employed get to deduct half their tax?

Because they have to pay twice as much as a normal employee

How much tax does self-employed have to pay? %age

15.30%

Which half of self-employed taxes is deductible?

Employer payroll taxes

Self-employed Health Insurance

For AGI

What can self-employed health insurance not exceed?

Self-employed net earnings

Who can’t take self-employed health insurance?

Those who can participate in a subsidized health plan

Subsidized health plan def

Paid health plan by someone else

Penalty on early withdrawal of savings (CD)

For AGI

Another name for early withdrawal penalty

Forfeited interest

Alimony

For AGI

What divorce finalized year is alimony paid deductible?

2018 and prior

Educator expenses

For AGI

Who can take educator expense deductions?

Fulltime (900 hrs) K-12

Who can’t take educator expense deductions?

Homeschooling

What is the limit of educator expense deduction?

$300 per educator

Deductions From AGI Schedule

Schedule A

Another name for From AGI deductions?

Itemized deductions

Medical Expenses

From AGI

Medical Expense floor

7.5% of AGI

Who can take medical expenses deduction?

Taxpayer, spouse, and dependents

What is a child of divorce considered for medical expense deductions?

Dependent

How much can a parent of a child of divorce take for medical expenses?

What they paid out of pocket

What test is waived for otherwise qualifying relative?

Gross income test

What are medical expenses that are not qualified?

Over the counter drugs, gym, diet, and cosmetic surgery

How much of a capital improvement to home (medical expense) is deducted?

The cost of the improvement - increase in FMV

Taxes

From AGI

Is there a floor or ceiling on taxes?

Ceiling

What is the ceiling on taxes?

$40,000 per year

What does taxes deduction include?

Personal property, real estate, state and local income tax, and foreign tax

What’s the different between personal property and real estate?

Personal prop is movable (car, trailer), real estate is non movable (land, house)

What can one use instead of state and local income tax?

Sales tax

Why is taking foreign tax deduction as From AGI less common?

Because its tax credit is better

What is not included in taxes From AGI deduction?

Federal income tax, social security, and Medicare.

Interest Expense

From AGI

What can you deduct in Interest expense category?

Mortgage, Points, and Investment interest

What’s not included in interest expense deduction?

Auto loans and credit cards

What is the max amount of principle for mortgage interest?

$750,000

How many homes can you have to count for mortgage interest?

Max of 2 homes

What year do points (mortgage interest) affect?

The year of purchase

What is investment interest expense limited to?

Net investment income (div, int, and gains/losses)

Charitable Gifts

From AGI

What is the ceiling of charitable gifts?

60% ceiling of AGI

What organizations count as a charitable gift?

US gov, non-profit orgs, war veteran organization, cemetery

What isn’t considered a donation?

Services, GoFundMe, thru individuals, political orgs

For Donations: what is property valued at?

FMV; Thrift shop value

If a donation is cash and <$250…

Written record

If donation is cash and $250+…

Acknowledgement from org

If donation is property and <$500…

Acknowledgement from org

If donation is property and $500-$5,000…

Form 8283

If donation is property and $5,000+…

Appraisal and Form 8283

How long can a taxpayer carryforward donations?

5 years

What org code should orgs have if they qualify as a charitable org?

501c3

Casualty and Theft Loss

From AGI

Casualty def

Sudden and unexpected

What area does a casualty and theft loss have to be in?

FDA (Federal Disaster Area)

Other Itemized Deductions

Gambling Losses

To what extent are gambling losses deductible?

Up to gambling income