Ch 3: Fundamentals of Income Taxation

Question 1

What is the minimum standard deduction for a depenedent?

Answer 1

$1,150

Question 2

If income is more than the minimum standard deduction for a dependent (1,150) what is the alternate standard deduction calculation?

Answer 2

Earned Income + $400

To find the calculation:
Earned income + Unearned income = X
Earned income + 400 = Y
X-Y = Alt Standard Deduction for a dependent

Question 3

accrual method

Answer 3

accounting method where income is reported when it is earned rather than when it is received in cash. Expenses are reported when they are incurred rather than when they are paid.

Question 4

Calculation for Adjusted Gross Income (AGI)

Answer 4

Gross income - above-the-line deductions = AGI

Question 5

Above-the-Line Deductions

Answer 5

Deductions for adjusted gross income, also known as adjustments to income.

Question 6

Below-The-Line Deductions

Answer 6

Deductions from adjusted gross income, also known as itemized deductions. Personal & Dependency exemptions are suspended by the TCJA 2017 until 2026.
The TCJA 2017 introduced a new Below-the-Line Deduction for flow-through entities: The QBI Deduction at 20%.

Question 7

cash receipts and disbursements methods

Answer 7

an accounting method where income is reported for the tax year in which they are received in cash and expenses are deducted in the year in which they are paid in cash.

Question 8

Gross Income

Answer 8

All income from all sources, unless specifically excluded.

Question 9

net unearned income (NUI)

Answer 9

the amount of unearned income of a child that is subject to tax at the parent’s marginal tax rate.

Question 10

2022 Standard Deductions Amounts for Single and MFJ

Answer 10

Single : $12,950
MFJ: $25,900

Question 11

List the Deduction Types (8) FOR AGI (Above-The-Line)

Answer 11

1. Alimony paid for divorces 12/31/2018 and earlier.
2. Traditional IRA contributions
3. interest paid on student loans (up to 2,500)
4. business expenses
5. Rental or Royalty income expenses
6. Losses from sale of business property.
7. Moving Expenses for Military ONLY 2018-2025.
8. K-12 educator expenses (up to $300).

Question 12

Partial List of Itemized deductions

Answer 12

charitable contributions
home mortgage interest
investment interest expense
up to 10K of SALT & Real Estate Property taxes
medical and dental expenses in excess of 7.5% of AGI.

Question 13

Calculation for NUI

Answer 13

NUI is determined by:
Subtracting the GREATER of:
1. $2300 - child’s unearned income
or
2. $1,150 + deductible expenses

Question 14

when does the dependent standard deduction become earned income + 400?

Answer 14

when the dependents unearned income is less than $2300