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3 exceptions to the basic tax computation.
1. When TPs have... income
2. ... income
3. The... tax
- 1. preferential
- 2. Net investment
- 3. kiddie
-
Preferential tax rates apply to... and... The tax rate for these items of gross income depends on the TP’s..., or...
LT capital gains, dividends, marginal tax rate, tax bracket
-
To compute tax liability when a TP has income taxed at a preferential rate.
Step 1: Split taxable income into the portion that is taxed at... rates and the portion taxed at... rates
Step 2: Compute the tax... on each type of income.
Step 3: Add the tax on each type of income together for...
- 1. preferential, ordinary
- 2. separately
- 3. regular tax liability
-
An additional tax of... is imposed on net investment income.
3.8%
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Net investment income includes:
1. ... ,... ,... and... income (assuming passive involvement)
2. Passive... or... income
3. Capital...
- 1. Interest, dividends, rent, royalty
- 2. trade business
- 3. gains
-
3 exclusions of net investment income:
1. ... interest
2. ... of principal residence
3. Amounts subject to...
- 1. Tax-exempt
- 2. Gain on sale
- 3. SE tax
-
Net investment income tax is assessed on lesser of...
1. ... over $250,000 MFJ, $150,000 MFS, or $200,000 other OR
2. ...
- 1. Modified AGI
- 2. Net investment income
-
The kiddie tax applies when children have... income
unearned
-
Unearned income is the child’s investment income including..., ..., ..., ..., ..., and other income that is not... income
dividends, taxable interest, capital gains, rents, royalties, earned
-
Congress enacted certain rules to prevent TP’s in... tax brackets from reducing or eliminating their tax liability by shifting income to... and other...:
1. Dependents do not receive a... on their own return
2. Dependents’ standard deduction is limited to the greater of:
a. ..., and
b. earned income plus... (not to exceed...)
3. Tax on net unearned income (NUI) of a child... is taxed at the... rate
- high, childern, dependents
- 1. personal exemption
- 2. a. $1,050
- b. $350
- 3. <18, parents'
-
The kiddie tax may apply to dependent children ages...-...
18-23
-
There are three basic steps for computing the kiddie tax:
1. Compute... (... - ...)
2. Compute “..." The lesser of:
a. ... - ..., and
b. ... income
3. Compute...
a. A portion is taxed at... tax rate
b. The remaining taxed at... tax rate.
- 1. Taxable income, GI - standard deduction
- 2. Net Unearned Income, GUI - 2100, taxable
- 3. tax liability, parents', childs'
-
The AMT is an... tax that taxpayers are required to pay that sets a... in terms of the amount of tax one must pay. This was originally to be paid by... income earners.
additional, minimum, high
-
The AMT is a tax based on an... tax base that more closely follows true... income.
alternative, economic
-
AMT income begins with... and then plus and minus adjustments are made to determine the...
regular taxable income, new taxable base
-
Itemized deductions that are deductible under AMT:
1. ... and... losses
2. ...
3. ... and... expense
4. ... losses
5. ... expenses (for TPs > 65 only if they exceed... of AGI)
- 1. casualty, theft
- 2. charitable contributions
- 3. home, mortgage interest
- 4. gambling
- 5. medical, 10%
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Itemized deductions that are not deductible under AMT.
1. ... and... taxes
2. ... and... taxes
3. ... expense not used to improve home
4. ...
- 1. real, personal property
- 2. state income, sales
- 3. home equity interest
- 4. MID
-
... are handled differently for AMT with specific amounts to be used based upon... and... income.
Personal exemptions, filing status, AMT
-
If the AMTI is above..., the AMT exemption will be based on the phaseout.
119,200
-
FICA taxes are paid by both the employee and the employer and consist of two components:
1. ...
2. ...
- 1. Social security
- 2. Medicare
-
The Affordable Care Act imposes an additional...% Medicare tax on... income individuals.
.9%, high
-
The tax base for employees is based on..., ..., and... paid by employers. The taxbase for self-employed individuals is...% of net self-employment income
salary, wages, other compensation, 92.35%
-
When a taxpayer is both self-employed and an employee, the taxes are first taken out of their... or...
wages, compensation
-
Credits are classified into 2 broad categories.
1. Nonrefundable credits only offset...
2. Refundable credits will result in a... if they exceed the...
- 1. tax liability
- 2. payment to the TP, tax liability
-
Tax credits reduce tax liability...
dollar-for-dollar
-
Deductions reduce... income so the reduction in the TP’s liability depends on their... tax rate.
taxable, marginal
-
With regards to the child tax credit, the amt. is... for each qualifying child <... years old and it is phased-out when AGI exceeds:
MFJ:...
Single:...
$1,000, 17, $110,000, $75,000
-
Phase-out computation for child tax credit.
1. ... - ...
2. Divide by... and...
3. Multiply by...
4. subtract from...
- 1. AGI - phaseout amt.
- 2. 1,000, round up
- 3. $50
- 4. total credit amt.
-
To be eligible for the earned income credit, a TP must have...
1. ... or meet the... requirement
2. ... income
3. not be a...
4. ... to... years old
5. Unearned income cannot exceed...
- 1. qualifying children, AGI
- 2. earned
- 3. dependent
- 4. 25, 64
- 5. $3,350
-
The earned income credit is a percentage of... income based on the number of... and your...
earned, dependent children, filing status
-
To be eligible for the child and dependent care credit, a TP must incur child and dependent care expenses as a result of:
1. ... activities
2. care for a child... or an incapacitated dependent or spouse living with TP for...
- 1. working
- 2. younger than 13, more than half the year
-
Computation for the child and dependent care credit.
1. Qualifying EREs x ...
2. EREs are capped at... for one qualifying child and... for 2 or more
3. The rate (35%) is reduced by... percentage point for each ... of AGI > $15,000, but goes no lower than... (the rate applied when AGI > ...)
- 1. 35%
- 2. $3,000, $6000
- 3. 1, $2,000, 20%, $4,300
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The American Opportunity tax credit is a $... credit for qualified... and related expenses for the... years of postsecondary education subject to ratable phaseout (MFJ $160,000 - $180,000; Single $80,000 - $90,000); a per-... credit.
first 4, tuition, student
-
The lifetime learning credit is equal to...% of qualified tuition and expenses up to... subject to phase-out (MFJ $108,000 -$128,000; Single $54,000 - $64,000); a per-... credit
20%, $10,000, TP
-
The lifetime learning credit is available for an... number of years.
unlimited
-
You cannot use both the LLC and the AOTC in... with respect to...
the same year, the same student
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