5. Above-the-Line Deductions and Losses

Question 1

Noneducator expense deduction limit?

Answer 1

the limit is $250, for unreimbursed expenses for books and supplies, and must be at least work 900 hours. Above the line deduction

Question 2

maximum amount to be contributed to HSA for MFJ?

Answer 2

$7200 in 2021, deductible from taxable income, above the line

Question 3

Deductibles in arriving at AGI?

Answer 3

alimony is deductible to payor, and income to payee/
IRA plan is deductible for AGI/
Child support is non deductible

Question 4

max deduction for interest on qualified education loan

Answer 4

Individuals are allowed to deduct interest paid during the tax year on any qualified education loan. The maximum amount that may be deducted is $2,500. To deduct taxable income, above the line deduction.

Question 5

what is included as qualified education expense?

Answer 5

qualified education expense include tuition, room, books, and transportation, etc necessities. It’s not above the line deduction, it impact the American opportunity tax credit, which will lower their tax.

Question 6

How much of the rental loss may they deduct?

Answer 6

general loss allowed is 25k, and it’s reduced by 50% of amount by which AGI (determined without SSB,IRA,Losses) exceeds 100k. The loss is deducted against other income.

Question 7

RE tax on rental property is on schedule A?

Answer 7

No. RE tax on rental property maybe deductible, but not as itemized deduction, on schedule E.

Question 8

what are examples of allowable interest expense for income?

Answer 8

personal interest is not allowed to deduct, loan interest for home and home improvement and mortgage interest are deductible interest expenses. They are itemized deduction.

Question 9

how the points are qualified to be fully deductible?

Answer 9

points are only deductible to purchase the principle home

Question 10

what is QBI calculated?

Answer 10

QBI is income as ownership, so wages doesn’t count, and dividend is removed from net income in calculating DNI.

Question 11

deductible casualty loss calculation on Shcedule A

Answer 11

1. calculate the lower of house’s original adjusted basis or FMV reduction
2. minus the insurance coverage
   3.minus $100, minus 10% of AGI

Question 12

What’s basis with inherited assets?

Answer 12

FMV at the time as new basis

Question 13

Gift tax on payments directly to medical expenses

Answer 13

Exempt from gift tax. Regardless of the amount

Question 14

social security benefit taxable

Answer 14

determined by provisional income, (wage, interest,etc and 50% of SSB)

Question 15

Amount to be recorded on form 709?

Answer 15

FMV at the time

Question 16

Health insurance premiums

Answer 16

Above the line deduction

Question 17

Interest deduction

Answer 17

Must be business related, on schedule A

Question 18

Deductible tuition expense

Answer 18

Above the line deduction

Question 19

Reportable gain or loss on the gifted

Answer 19

To calculate gain ,use the adjusted basis

To calculate loss, use the FMV when gifted ( if lower than AB)
1. Sales price > gain basis, calculate gain
2. Sales price < loss basis, calculate loss
3 sales price in between, no reportable

Question 20

Gifted stock basis

Answer 20

Always the FMV when gifted, and always treat as long term

Question 21

Treatment of short term capital loss

Answer 21

Only use $3,000 against normal income, the rest to be carried forward

Question 22

1250, 1245 recapture gain

Answer 22

1250- 房产，25%
1245- 车，办公工具，37%

Question 23

Gift to charity

Answer 23

Need file, but no gift tax ever

Question 24

Payments/ gift to government, school, hospital

Answer 24

No need file

Question 25

When does donee have dual basis?

Answer 25

Normally, when a gift is received, the donee takes the donor’s basis in the property. However, if the property’s FMV on the date of transfer is less than the donor’s basis in the property, the donee has a dual basis in the property. Since the property is resold at more than the FMV on the date of the gift but less than the donor’s basis on the date of the gift, no gain or loss is recognized.