Above-the-line vs Itemized deductions
Above-the-line reduce AGI (e.g. SE health insurance
Which is better: tax credit or deduction?
Tax credit (reduces tax liability dollar-for-dollar)
Investment interest deduction limit
Limited to net investment income (NOT total income)
What counts as investment income?
Interest + nonqualified dividends + short-term capital gains
Passive activity loss rule (real estate)
Up to $25
Rental loss at $150k income
Generally $0 deductible (fully phased out)
Ordinary income vs capital gain
Ordinary: wages
Short-term vs long-term capital gains
ST (<1 yr) taxed as ordinary income; LT (>1 yr) taxed at lower rates
Cost basis
What you paid for an asset (used to calculate gain/loss)
Step-up in basis at death
Basis resets to fair market value at date of death
Charitable donation: LT capital gain property
Deduct FMV (if held >1 year)
Charitable donation: ordinary income property (inventory/ST gain)
Deduct cost basis (NOT FMV)
Public charity examples
Churches
Private foundation vs public charity
Private foundations have stricter limits; public charities allow higher deduction limits
AMT add-back (big one)
State and local taxes are added back
Casualty loss deduction (basic)
Loss - $100 - 10% of AGI (if applicable rules met)
Self-employed AGI adjustments
SE health insurance
Dependent care credit
Based on expenses (max $3k for one
Like-kind exchange rule
Real estate for real estate only (not personal property)
Personal residence sale exclusion
$250k single / $500k married gain exclusion if requirements met
Loss on personal residence
NOT deductible
Hobby loss rule
Expenses cannot exceed income (no net loss allowed)
NOL basic rule (pre-2018)
Can offset income in other years (carryback/carryforward)
Section 1244 stock loss
Ordinary loss up to $50k single / $100k married
