Personal Exemptions Flashcards
What are examples of taxable income?
- Wages, salaries, bonuses, commissions
- Alimony (for divorce before 2019,
- unemployment compensation
- Annuities
- Awards
- Back pay
- Breach of contract payment
- Business income/Self-employment income
- Cash income
- Compensation for personal services
- Canceled debts
- Director’s fees
- Disability benefits (employer-funded)
- Discounts
- Dividends
- Employee awards
- Employee bonuses
18.Estate and trust income - Farm income
- Fees
- Gains from sale of property or securities
- Gambling winnings
- Hobby income
- Interest
- Interest on life insurance dividends
- IRA distributions
- Jury duty fees
- Military pay (not exempt from taxationMilitary pension
- Nonemployee compensation
- Notary fees
- Partnership, Estate and S-Corporation income (Schedule K-1s, Taxpayer’s share)
- Pensions
- Prizes
- Punitive damage award
- Railroad retirement—Tier I (portion may be taxable)
- Railroad retirement—Tier II
- Recovery of prior year deduction (medical,property taxes, etc.)
- Refunds of State and local income tax (if reportable)
- Rents (gross rent)
- Rewards
- Royalties
- Severance pay
- Self-employment (gross income)
- Social security benefits - portion may be taxable -
- Supplemental unemployment benefits
- Taxable scholarships and grants
- Tips and gratuities
- Tribal per capita payments
What are examples of Nontaxable Income?
- Aid to Families with Dependent Children (AFDC)
- Child support
- Civil damages, restitution or other monetary award paid to someone because that person was wrongfully incarcerated
- Payments to the beneficiary of a deceased employee
- Damages for physical injury (other than punitive)
- Death payments
- Dividends on life insurance
- Economic Impact Payment
- Employer reimbursements for ordinary or necessary actual expenses
- Federal Employees’ Compensation Act payments
- Federal income tax refunds
- Gifts
- Inheritance or bequest
- Insurance proceeds (Accident, Casualty, Health, Life)
- Interest on tax-free securities
- Interest on EE/I bonds redeemed for qualified higher education expenses
- Meals and lodging for the convenience of employer
- Olympic and Paralympic Games medals and prizes
- Payments in lieu of worker’s compensation
- Qualified Medicaid waiver payments
- Relocation payments
- Rebate/Patronage Dividends issued by co-ops for personal use are not taxable
- Payments to the beneficiary of a deceased employee
- Rental less than 15 days
- Rental allowance of clergyman
- Reverse mortgages
- Sickness and injury payments
- Social security benefits - portion may not be taxable (Income, Railroad Retirement, Civil Service, and Social Security Benefits)
- Supplemental Security Income (SSI)
- Temporary Assistance for Needy Families (TANF)
- Veterans’ benefits
- Welfare payments (including TANF) and food stamps
- Worker’s compensation and similar payments
- Payments to the beneficiary of a deceased employee
What is an exemption?
An exemption is a dollar amount that can be deducted from an individual’s total income, thereby reducing the taxable income.
What 2 kinds of exemptions can a taxpayer claim?
Taxpayers may be able to claim two kinds of exemptions:
• Personal exemptions generally allow taxpayers to claim themselves (and possibly their spouse)
• Dependency exemptions allow taxpayers to claim qualifying dependents
When can a taxpayer claim personal exemption?
Does this apply even if another taxpayer does not actually claim the taxpayer as a dependent?
To claim a personal exemption, the taxpayer must be able to answer “no” to the intake question, “Can anyone claim you or your spouse as a dependent?”
Yes, this applies even if another taxpayer does not actually claim the taxpayer as a dependent.
Should married taxpayers filing a joint return also check the box if the spouse can be claimed as a dependent by another taxpayer?
Would they have to use a smaller or higher standard deduction?
. Married taxpayers filing a joint return should also check the box if the spouse can be claimed as a dependent by another taxpayer. This means they may have to use a smaller standard deduction amount.
When is an individual not a dependent of a person?
An individual is not a dependent of a person if that person is not required to file an income tax return and either does not file an income tax return or files an income tax return solely to claim a refund of estimated or withheld taxes. If this is the situation, the taxpayer should answer “no” to “can anyone claim you as a dependent?”
