![]() Modified AGI < $65,000 ($130,000 for MFJ)Ģ) deduction is LESSER of amount paid OR $2,000 **MFS does not apply Limitations on qualified education expenses (no phase out percentage calculations) 1) deduction is up to $4000 Modified AGI is equal to or ABOVE $80,000 ($160,000 for MFJ) Phase out percentage for single or HOH (modified AGI-$65,000)/$15,000 Phase out percentage for MFJ (modified AGI-$130,000)/$30,000 qualified eduction expenses are limited to tuition and fees required for enrollment at a postsecondary institution of higher education Modified AGI for purposes of qualified education expense AFTER deducting the education loan interest expense but BEFORE deducting qualified education expense Married Filing separately individuals are excluded from qualified education loan interest deduction, AND qualified education expense deduction qualified education expense deduction LIMIT $4,000 (MFS are NOT eligible***) AGI Limitations on education deductions (EXHIBIT 6-4) 1) deduction up to $2500Ģ) deduction up to $2500 reduced by the phase out amount However,the deduction is reduced (phased-out) for taxpayers depending on the taxpayers filing status and modified AGI) Modified AGI for the purposes of education loans deductions BEFORE deducting interest expense on the loan and BEFORE deducting qualified education expenses Self-employed individuals are allowed to deduct the employer portion of the self-employment tax they pay Tax treatment of early withdrawal penalty deduction FOR AGI (penalty for premature withdrawal of a CD) Alimony payments are deductible_ FOR agi to maintain equity Contributions to retirement savings are deductible_ FOR AGI to encourage savings Qualified educations loans are loans whose proceeds are used to pay for qualified edudcation qualified education loans expenses tuition and fees, books and expenses required for enrollment, room and board and other necessary supplies and expenses including travel Deduction for interest expense on qualified education loans LIMIT amount paid up to $2500 (not considered a business expense that can be deducted) S corporations Where income from flow-through entities are reported Schedule E of the tax returns of the owners Moving expense deduction qualifications Individuals qualify for a moving expense deduction if they move and CHANGE THEIR PRINCIPAL PLACE OF WORKįOR AGI deductions Requirements to deduct moving expenses as FOR AGI 1) a distance test- must be at least 50 miles more than the distance from the old residence to the old place of work than the old residence to new place of workĢ) a time test -must be employed full time for the 39 weeks of the first 52 weeks after th move or be self employed for 78/104 week after the move Deduction per mile for moving expenses 23.5 cents Non deductible moving expenses Meals during the move or costs associated with house hunting trips Taxpayers who receive a FLAT amount from the employer for moving expenses must include the allowance in gross income, and deduct actual moving expenses FOR AGI Self employed taxpayers can claim health insurance premiums as deductions FOR AGI Employers can deduct Social security and medicare they pay on employee salaries Self employment tax includes the employee AND the employers share of SS and medicare taxes. Losses in excess of $3000 are carried forward indefinitely to subsequent years when they are deductible subject to the same limitations Examples of flow-through entities Partnerships 1 line 17 Net capital loss for a year $3000 (if the capital losses exceed the capital gains) Taxpayers transfer the NET income or loss from schedule E to form 1040 pg. 1 line 12 Where Rental and royalty revenues are reported Schedule E Taxpayers transfer the NET income or loss from schedule C to form 1040 pg. Ordinary and necessary Limits business deductions to be appropriate and helpful for generating a profit Where business deductions are reported Schedule C
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