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What qualifies as a “Qualifying surviving spouse”?
Claimed <= 2 years after death
AND
1. The taxpayer has a dependent
- This child lived in home for all of the current tax year
- The taxpayer paid over half the cost of home
- The taxpayer could have filed a joint return in the year the spouse died.
Exception: NOT Married again
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What qualifies as a HOH?
“HOH”
1. Legally separated at year end
2. Lives apart over 6 months
3. Dependent
4. Pays over 50% for dependent
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What qualifies as a dependent (QC or QR)?
QC
1. Close Relative
2. Age limit - under 19 or 24 if FT student
3. Residency - over half the year
4. Eliminate gross income - does not apply
5. Support test - must be support over half of expenses
QR
1. Support test > 50% support
2. Under a specific amount of gross income ($5500)
3. Precludes dependent filing joint return
4. Only citizen of US
5. Relative test - in-law/foster included
OR
6. Taxpayer lives with individual - whole year
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What is included in AGI (Income)?
- Wages - Property (FMV),
- Taxable fringe benefits (company car)
- Interest - State government obligation interest and municipal bonds is not taxable
- Dividends - taxable
- State tax refunds
- Alimony - before 12.31.2018 included in gross income, pymt deductable
- Business income (SCH C - Net expenses and guaranteed payments)
- Capital G/L -
- IRA income - Taxable when taken
- Pension and annuity -
- Rental income - Schedule E (NET amount)
- K-1 G/L
- Unemployment comp -
- Social security benefits - taxable for middle and higher end rental
- Other income - punitive damages, cancelation of debt, non-degree grants
- Awards
- Room and Board, not scholarships included
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What are AGI Adjustments (above the line)? (SE STEAM)
“AGI adjustments ““deductables”” after Gross income (Above the Line)”
- 50% self employment tax deductable
- Self employment plan contributions
- Self-employment health insurance
- Student loan interest (2500 per year)
- Traditional IRA (Max 7,000)
- Educator expenses (K to Grade 12) $300 CAP
- Alimony (Net child support)
- Moving expense - military only
- Penalty on withdrawl savings
- HSA - If other purpose 20%
IRA Phase out
1. 123K
2. 230K
3. Can contribute up to 7,000 in IRA
self-employed individuals to a SEP IRA is the lesser of $69,000 (2024) or 20 percent of net earnings.
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What are all the itemized deductions (Schedule A)?
Schedule A Deductions
* Medical expense (over 7.5% AGI)
* Taxes paid and withheld (state/local/property up to $10,000)
* Interest Expense on mortgage
* Charitable contributions (Limit 30% AGI OR 60% of AGI if CASH)
Excess is carried forward 5 years max
* Casualty/Theft Loss
loss must exceed 10 percent of AGI plus $100 per casualty.
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Who qualifies for additional standard deduction?
Blind or older than 65 YO ($1550 per person)
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What qualifies as medical expense deduction (Itemized)?
Qualified medical expenses - Access of 7.5% of AGI for total medical expenses
Prescription medicine
Doctors
Medical insurance premiums
Necessary surgery
Transportation to medical facility
Disabled costs
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What are all the refundable, but reduces liability credits?
(FACEEE)
Refundable credits (FACEEE)
- Federal income tax withheld
- American opportunity credit (40%)
- Child tax credit - 1.7K for each child under 17, us citizen, 200K phase out
- Earned income credit - low level income, US citizen, < 25 or > 65+
- Excess social security
- Excess Estimated Taxes
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What are all the Non-refundable, but reduces liability credits? (CLEARFAG)
(CLEARFAG)
- Child and dependent care credit - 20% to 35% of child related expenses, Max 3,000, 6000 if 2+ kids (Under age of 13 or disabled dependent/spouse), Ex: nursery/day care usually
Calculation = Max amount * applicable % = $ credit - Elderly and/or permanently disabiled credit - (65+ and/or perm. disabled) 15% of eligable income (5K - single, 7.5K MFJ, 3.750 MFS)
- Lifetime learning - 20% up to 10,000, EX: Tutition/graduate/prof degrees (Per Taxpayer), courses to improve job skills, phased out at 90K, 180K MFJ
- American opportunity credit (60% of the 2500 Max) - tutition/fees (Per student) - Max 2500 (100% of first 2K, 25% of next 2K) , phased out at 90K, 180K MFJ
- Retirement savings - 18+, not student, not dependent, 10%, 20%, 50%, MAX $2,000
- Foreign tax credit - Max = % of total income
- General business credit - 100% up to 25k, 75% in excess
- Adoption credit - 17,280 MAX, 250K phase out, all reasonable costs, no spouse family allowed
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What are the kiddie tax thresholds?
0 to 1350 = No tax
1351 to 2700 = Child Tax Rate
2700 + = Parent’s Rate
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What is calculation for 199A QBI Deduction (CAT 1)? (<195,900)
Cat 1: QTB and SSTB is the same. Pick lessor of 1 or 2
1. QBI * 20% = (Tentitive QBI)
2. TI before QBI - Net capital gains = Overall limit
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What is calculation for 199A QBI Deduction (CAT 2)? (>241950)
1 $20,000.00 QBI * 20% = (Tentitive QBI)
2A $15,000.00 W2 Wages * 50%
2B $9,500.00 W2 Wages * 25% + (UBIA *2.5%)
2C Pick greater of 2A or 2B
3 Lesser of step 1 and step 2
4 $50,000.00 QBI deduction * 20% = Overall limit
5 Lessor of step 3 and step 4
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What the calculation for Schedule C Income?
+Business income
-guaranteed payments
-Expenses
-COGS
-Salaries and commissions to OTHERS
-State and local business –taxes
-Office expenses
-Auto expenses
-50% meal expenses
-Depreciation
-Employment benefits
-Legal fees
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What is the NII Tax?
3.8% of AGI
