Annotated Chapter 3 Lecture Flashcards
(28 cards)
Individual taxpayers have two categories of deductions:
-deductions FOR adjusted gross income
-deductions FROM adjsuted gross income
What are deductions FOR adjusted gross income
-known as above-the-line deducctions
-they are taken before the “line” designating AGI
deductions FROM adjusted gross income
-the greater of itemized deductions or the standard deduction
what is adjusted gross income
an important subtotal, serves as the basis for computing percentage limitations on certain itemized deductison such as (medical expenses, charitable contributions, casualty losses)
For deductions FROM AGI, what is the STANDARD DEDUCTION
the sum of 2 components:
1.) the basic standard deduction (based on filing status)
2.) Additional standard deduction (available for taxpayers who are age 65 or over, available for taxpayers who are blind)
basic standard deduction
the amount depends on the filing status of the taxpayer (check the 2024 values)
additional standard deduction
for tax payers age 65 or older and/or legally blind (check 2024 level)
standard deduction for person claimed as a dependent
-limited to the greater of:
-$1,300 or
-$450 plus earned income (but not exceeding the basic standard deduction)
-the additional standard deduction is still available
the definition of a dependent
either a qualifying child or a qualifying relative
qualifying child needs to meet what tests (4)
-relationship
-residence
-age
-support
what is the relationship test
*the child must be the taxpayer’s:
-son or daughter
-stepson or stepdaughter
-brother or sister
-stepbrother or stepsister
-half brother or half sister
-a descendant of such individual (e.g. grandchildren, nephews, nieces)
*a child who has been adopted, or whose adoption is pending, qualifies
*a foster child may also qualify
residence test
-a qualifying child must live with the taxpayer for more than half of the year
for the residence test, are temporary absences from the household due to special circumstances considered for the residence test
no, they are not considered
what is the age test
-the child must, by the end of the year, be under age 19 or under age 24 AND a full-time student
*a full-time student is a child who was in school during any part of five months of the year
*individuals who are disabled are not subject to the age test
*a qualifying child must be younger than the taxpayer claiming the child (e.g. a brother cannot claim his older sister as a qualifying child)
what is the support test for a dependent
-to be a qualifying child, the individual must not be self-supporting
* the child cannot provicde more than one-half of his or her own supprot (support includes food, shelter, clothing, medical, and dental car, education, recreation/toys, transporation, and similar items)
-in the case of a full-time student, scholarships are not considered to be support
what tests are needed qualifying relative
-relationship
-gross income
-support
what is the relationship test for a qualifying relative
those included are the following relatives”
-lineal ascendants (e.g. parents, grandparents)
-collateral ascendants (e.g. uncles, aunts)
-certain in-laws (e.g. son-, daughter-, father-, mother-, brother-, and sister-in-law)
what does the relationship test for a qualifying relative also include
-individuals who are “members of the household” (i.e. live with the taxpayer for the entire year) (unrelated person)
what is the gross income test for a qualifying relative
-dependent’s gross income must be less than 5,050
-gross income is determined by any income that is taxable
support test
-taxpayer must provide more than 50% of the qualifying relative’s support
(only amounts expended are considered in teh support tes’ if the individual does not spend funds that have been received from any source, the unexpended amounts are not counted as support)
-scholarships are not considered in the support test
what two other tests must a dependent also meet
-the joint return test and the citizen test
what is the joint return test
if a dependent is married, teh dependent cannot file a joint return with the dependent’s spouse unless the reason to file is solely to claim a refund (no tax liability exists)
what is the citizenship test
the dependent must be a US citizen, a US resident, or a resident of Canada or Mexico (except for an adopted kid as long as their principal residence is with a US citizen)
what are the 5 filing statuses
-single
-married, filing jointly
-surviving spouse (qualifying widow or widower)
-head of household
-married, filing separately
