REG 1 - Federal Taxation of Individuals Flashcards
(28 cards)
Is a state tax refund taxable income if you itemized deductions?
YES
To the extent the original deduction provided a tax benefit.
What rule requires a taxpayer to include in gross income recovered amounts that the taxpayer deducted in a prior taxable year to the extent those amounts reduced the taxpayer’s tax liability in the prior year.
THE TAX BENEFIT RULE
Is interest taxable?
Yes, with the exception of interest from state and local (municipal) bonds.
Premiums paid by an employer up to ____________ of coverage for an employee are _____________from gross income as fringe benefits, anything exceeding this are taxable based on IRS tables
$50,000
EXCLUDED
The requirements for qualified surviving spouse are:
1. taxpayer’s spouse died in one of the _______ previous years
2. taxpayer has a ________ who can be claimed as a dependent
3. This dependent lived in the taxpayer’s home for ________ of the current year
4. taxpayer paid _______ of the costs of maintaining the home for the dependent.
5. The taxpayer could have filed a joint return in the year the spouse died
TWO
CHILD
ALL
OVER HALF
To qualify as a Head of Household, the taxpayer must:
1. Be ____________as of the last day of the tax year,
2. Maintain a home that is the principal residence of a qualifying child, relative or parent for _________ of the year; with the caveat that the qualifying parent is allowed live apart from the taxpayer for the full year, as long as the taxpayer maintains over half the living costs.
3. The taxpayer __________ be a surviving spouse qualifier.
A cousin __________ a dependent relative.
UNMARRIED
OVER HALF
CANNOT
IS NOT
In order to be a qualifying child, all must be true:
1. Close relative (Child, step, sister, legal adopted child, legal foster child)
2. Under the age _____, or under the age ____ if a full-time student (full time student = in school at least ______ of the year)
3. Same principal abode as taxpayer for more than one half of the year, but they are allowed to be away longer if at school.
4. A citizen of the US or resident of the US, Canada or Mexico.
5. The QC must not have contributed more than _____ of his/her own support, scholarships do not count as support.
6. There is no gross income test.
19 years old , 24 years old, 5 months
HALF
In order to be a qualifying relative, all must be true:
1. The taxpayer must have supplied _________ of the support to the QR
2. The QR must have a gross income of less than ________.
3. The QR ____________be a married dependent who files a joint return
4. The QR must be a citizen of US or resident of US, Mexico or Canada.
OVER HALF
$5,050
CANNOT
Social Security, scholarships, fellowships and municipal bond interest are examples of what? Are they included in the gross income limitation test?
Nontaxable income
They are not included
Regular withdrawals from deductible traditional IRA’s are taxed as __________ income. Withdrawals prior to the age of ______ are considered early withdrawals and are subject to a ________ penalty tax (with some exceptions)
ORDINARY
59.5
10%
The QBI deduction permits individuals to deduct up to ________ of their income from pass-through entities on their personal returns. The QBI is the ordinary business income on a K-1.
20%
The limit of the QBI deduction is the lesser of the combined QBI deductions or ________________________.
20% of the taxpayer’s taxable income (in excess of net capital gain, if applicable).
The Net Investment Income (NII) tax is _______ of the lesser of (1) the taxpayer’s net investment income; or (2) the excess of modified AGI over a threshold amount.
3.8%
The estimated tax payments to avoid the penalty for the underpayment of estimated tax is the ________ of:
- 90% of the tax on the return for the _______ year paid in four equal installments.
- _______ of the prior year’s tax liability paid in four equal installments for single AGI under ________ (or /2 if married filing separately). If AGI is above that threshold, it is _______ of prior year’s tax liability in four equal installments
Lesser
current year
100%, $150,000, 110%
The child tax credit allows taxpayers to claim a _____________ tax credit for each qualifying child. Each child must be under the age _______ and a citizen or resident of the US.
$2,000
Under the age 17
Medical expenses are deductible as ___________ deductions in excess of _____ of AGI.
Itemized
7.5%
Alimony from a divorce agreement executed before December 31, 2018 __________ considered income.
Child support is ___________ considered income.
IS
NOT
Punitive damages are _____________, except in a wrongful death case.
Personal injury damages are __________________.
TAXABLE
NOT TAXABLE
Interest on up to ______________ (or /2 if MFS) of home- related indebtedness is an ____________ deduction as home mortgage interest.
Home-related indebtedness = buying, constructing, or ______________ a principal or second home (a home that is used for personal purposes for at least 14 days in a tax year qualifies as a “second home”).
$750,000, itemized
substantially improving
Cash basis taxpayers deduct loan interest in the year paid or the year to which the interest relates, whichever is _________.
LATER
Self-employment tax is _______ deductible from gross income to arrive at Adjusted Gross Income (i.e. above the line deduction)
50%
What is the maximum amount of student loan interest that can be deducted from Gross Income per year to arrive at AGI? Phase-out starts at $80k if unmarried and $165k if MFJ.
$2,500
Taxes are deductible as itemized deductions up to $_______ total. You can deduct for these types of taxes: state income tax, personal property tax on personal automobile, and real estate tax on personal residence.
$10,000
Charitable contributions are deductible as ___________
_____________only if the contributions are made to a qualifying charity (not including political contributions, foreign charities, cash donations to needy families).
Itemized Deductions
