Adjustments for AGI (Above the line deductions)
*CPA will often refer to "adjustments" as "deductions to arrive at adjusted gross income)
*Educator expenses (up to $250 of qualified expenses paid)
*Traditional IRA contribution deduction (up to $6,000)
*Student loan interest deduction
*Health savings ac
Itemized Deductions (below the line adjustments)
*Difference between Itemized deductions and Adjustments is Adjustments apply every year and itemized you have to pass a test each year to be applicable
*Below the line adjustment
Standard Deduction
*Freebie (always entitled to these amounts, if better than itemized deductions)
*Single = 12,400
*Head of household = 18,650
*MFJ or surviving spouse = 24,800
Married filing separately = 12,400
-Available only if both taxpayer and spouse do not itemize
*A
Itemized Deductions
Schedule A = personal
Itemized deductions: Medical, Taxes Interest, Charity, Casualty, Misc.
Taxes (Itemized deductions)
*State, Local, and Foreign taxes (Not Federal income taxes)
*Real Estate Taxes (State and Local Taxes)
*Personal Property Taxes: Vehicles and boats
*Income Taxes (State, Local, and Foreign Taxes)
*Sales tax: can elect to deduct either state and local inco
Interest (Itemized Deductions)
*HIPPE
-Home Mortgage Interest (Interest on up to $750,000 on 1st and 2nd home)
-Investment Interest expense: limited to net taxable investment income (no "negative" amount allowed as a tax deduction)
-Personal (consumer) Interest in Not Deductible
-Prepa
Charity
*Charitable items given to qualifying charitable Organizations are tax deductible
Carryover of Excess Charitable contributions are carried over 5 years
-Gifts and Political contributions, not deductible
Casualty Losses (10 percent of AGI Floor)
*Only deductible if sustained in a presidentially declared disaster area
*If you have no idea, go with the smallest answer, typically either insurance will knock it out or the 10% AGI Floor will knock it out
Miscellaneous Itemized deductions
*2% of AGI Floor
*Gambling losses: only to the extent of gambling winnings (Not subject to 2% AGI test)
*Federal Estate Taxes (Not subject to 2% AGI test)
*Exam hint: Test will ask you which item is an "adjustment" or "itemized deduction
Nonrefundable Personal Tax Credits
*Reduce taxes, but no refund
*Child and dependent care credit
*Elderly and permanently disabled credit
*Education credits (Lifetime learning credit & American opportunity credit- 60% nonrefundable)
*Retirement savings contribution credit
*Foreign tax cred
Refundable Credits
*Child tax credit (refund is limited)
*Earned income credit
*Federal income tax withheld (Form W-2)
*Excess Social Security tax paid
*American Opportunity credit (40% refundable)
AMT Exemption Amounts
Unmarried = 72,900
MFJ = 113,400
MFS = 56,700
AMTI phase-out thresholds:
Unmarried = 518,400
MFJ = 1,036,800
MFS = 518,400
AMT Adjustments
*PANICTS
-Passive activity losses
-Accelerated depreciation (post-1986 purchase)
-Net operating loss of the individual taxpayer
-Installment income of a dealer
-Contracts-- % completion vs. completed contract
-Tax "deductions"
-Standard deduction
Tax Preference
*PPP
-Private activity bond interest income (on certain bonds)
-Percentage depletion deduction (excess over adjusted basis of property
-Pre-1987 accelerated depreciation
Credit allowed against AMT
*Child and dependent care credit
*Adoption credit
*Child tax credit
*Contributions to retirement plans credit
*Residential energy credit