Tax 1

4 ways to file taxes

married jointly, married separately, single, and head of household

Two special cases

Abandoned spouse and surviving spouse

What is an abandoned spouse

6 months or more where you don’t know where your spouse is

What is a surviving spouse

When your spouse dies. Can claim it for three years after the initial year

What is the qualifying child?

Financial support, under 19, live with the taxpayer for more than 6 months (including temporary absences),

What are the other age rules?

If you are under 24 and a full time student

What is qualifying relative

A relative that lives with taxpayer, GI under the limit, taxpayer provides more than half support

What is the GI under the limit

5300

Wages, salary, tips, and bonuses: taxable or excluded?

Taxable

Lottery winnings or a cash contest prize

Taxable

Cash gift received from a parent: taxable or excluded?

Generally excluded

Inheritance received: taxable?

Excluded

Loan proceeds: taxable?

Not income, so not taxed

Employer provided health-insurance

Generally excluded

Qualifying medical expense reimbursement under employer health coverage: taxable?

Excluded

Life insurance proceeds received because insurer died

Excluded

Scholarships used for tuition and required textbooks: taxable?

Excluded

Scholarships for room and board: taxable?

taxable

What are the four criteria for deductibility

Ordinary, necessary, trade/business related, and reasonable in amount

What is ordinary criteria

Common expenses

What is necessary criteria

Something necessary to make a profit

What is trade/business related

Cost is already connected to an existing activity

What is reasonable amount

The amount and purpose aren’t excessive

What precludes deductibility

Personal expenditures, capital expenditures, costs of earning exempt income. & items contrary to public policy

What are personal expenditures

Personal costs like groceries

What are capital expenditures

Cost buys or improves a long term asset, like fixing a roof

What are costs of earning exempt income

Can’t deduct costs incurred to produce income that isn’t taxed

What are items contrary to public policy

Illegal activity like bribing or blackmailing

What is the standard deduction amount for singles and married separate

16100

What are the standard deduction amount for married jointly

32200

What is the standard deduction for head of household

24150

What are the Major Sources of Income

Compensation for services, business net income of proprietors, portfolio income, rental/royalty income, and private retirement plan income

What are the other sources of income

Alimony, prizes/awards, gambling income, unemployment, and social security benefits