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Flashcards in REG 7 Deck (16):

Child Tax Credit
Phase OUT
Age of Dependents

Notice it's different from the child care tax credit

$3,000 max per employed parent
dependents must be under the age of 17
$1,000 per child
Phase out for singles - when Modified AGI reaches $75,000
$50 for each $1,000 (Or part thereof) you make above the $75,000

MAGI: Add back student loan interest, 1/2 SE tax, qualified tuition expenses, tuition and fees deduction (what's the difference between the last two), passive loss or income, ira contributions, taxable social security payements, rental losses


Two types of passive activities

Trade or business in which you don't materially participate
Rental activities are always passive unless you are a real estate professional


Child and dependent care credit
Which children (qualifying)
Which dependents (qualifying)
what must u be doing

Child - under age of 13, dependent, but I guess u have to have custody
Dependent who is physically handicapped
Spouse who is incapable of caring for self


Are these enough to disqualify you from the EIC
Your child only lives with you 8 months
Married filing separately
Qualifying child is a 17 y.o. grandchild

Child needs only to live with you for 6 months
NO married filing separately
Child can be age 19 or 24 if a student

Remember this isn't the child care credit


At Risk Rules
Entity or Shareholder level for pass=throughs such as partnerhips/Scorpts

Shareholder level


At risk rules:
Limit types of deductions or losses (or both) in income producing activities

Not deductions, but the amount of losses that can be claimed


At risk rules
Apply to business and income-producing activities on a combined or separate basis?

Apply to each activity on a separate basis.


At risk rules
Limit what for the taxpayer?

Deductible losses from investment activities.


AT Risk Rules
Phaseout income level for losses against ordinary income

It's 150,000 of MAGI not AGI, after that you can't offset any of your passive activity against ordinary income. Though I do think you can carry it over.

Between 100-150 phase out, you can deduct a portion of 25K

If under 100 can offset the loss against passive income only from rental real estate activity in which you actually participate (actually that's true for any income level) and then take another 25K against ordinary income. The formula is 50% of the excess over MAGI (not AGI) up to $150,000.

In other words, since you actively participate in it, even though it's technically a passive activity because it's rental real estate, you get to deduct some of it against ordinary income


At risk rules:

Normally passive loss only offset against passive income, but when can you deduct everything including c.o. losses from prior years.

When you totally dispose of the passive activity loss business.


What's it called when you can't deduct a passive activity loss?

Can they be carried forward/back or both?

It's called a suspended loss.

Can be only carried forward and offset against the gross income attributable to those passive activities (I wonder if each activity is separte.).


What happens when the losses in an at risk activity exceed the at-risk amount invested?

The losses are suspended (this may be why you have to keep track of the at risk amounts for each activity) and carried forward without expiration and are deductible in future years against income from that activity.

notice without expiration
you can't deduct them against income from other acitivities
you can also deduct them when you dispose of the activity
no carryback


What are the limitations for paying estimated taxes?
withholding ______ of what years liability and ______ of current years liability
taxes _____ less than ____
credits exceed ___

witholding covers 100% of previous years liability and 90% of current liability unless you make over 150,000 then you need to pay 110% of lastyearsj
taxes due (not liability last year) in the current year less than $1,000
EIC will exceed tax liability for the current year

frankly I don't know the difference between due and liability


What are exemptions for?

The people filing the return and their dependent's.
$4,000 each


How much can a dependent earn and still qualify as a dependent?

Full time student, under age 24, gross income test does not apply

Dependent must not earn more than exemption, must earn less then $4,000
Parents provide more than half support
Must have lived there all year long


When does the personal exemption start phasing out.

$258,250 complete at $305,050

2% for each $2,500 over this amount