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32 Cards in this Set
- Front
- Back
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Alternative minimum tax calculation formula |
Regular taxable income (form 1040) +/- Adjustments + Tax preferences = Alternative minimum taxable amount
- Exemption amount = Alternative minimum tax base
* 26% or 28% (but reduced rates for qualified dividends and net capital gains) = Tentative before foreign tax credit
- AMT foreign tax credit = Tentative minimum tax
- Regular tax liability (reduced by regular tax foreign tax credit) = AMT (if positive) |
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26% AMT tax rate applies to |
the first $179,500 of AMT in excess of the exemption amount |
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28% AMT tax rate applies to |
AMT income above $179,500 in excess of the exemption amount |
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You only have AMT if |
the tentative minimum tax exceeds regular tax liability |
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Adjustments for AMT |
1. Real property placed in service after 1986 and 1999, the difference between regular tax depreciation and SL depreciation over 40 years
2. Personal property placed in service after 1986, the difference between regular tax depreciation using the 200% declining balance method and depreciation using the AMT 150% declining balance method (switching to SL when necessary to maximize the deduction)
3. Excess of stock FV over amount paid upon exercise of incentive stock options
4. If you took the regular tax medical expense deduction of 7.5%, compute using a 10% floor Medical expense deduction is computed using a 10% floor |
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When are deductions for home mortgage interest allowed for AMT? |
If loan proceeds were used to buy, build, or improve the home
(add back as an adjustment) |
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What deductions are not allowed to compute AMT? |
Personal, state, and local taxes Misc. 2% itemized deductions Standard deduction Personal exemption
(added back as an adjustment) |
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Long-term construction contracts method allowable under AMT |
Percentage of completion method Recompute if you had used completed contract |
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Examples of preference items |
1. Tax exempt interest on private activity bonds. If they were issued in 2009, and 2010 they are not an item of tax preference
2. Accelerated depreciation on real property and leased personal property placed in service before 1987 - excess of accelerated depreciation over straight line
3. The excess of percentage depletion over the property's adjusted basis
4. 7% of the amount of excluded gain from the sale of qualified small business stock (however there is no preference for for small business stock gains qualifying for the 100% exclusion through 2013) |
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AMT's effect on tax credits |
Tax credits may reduce regular tax liability, but only to the extent that regular income tax liability exceeds tentative minimum tax liability
All nonrefundable personal credits are allowed to offset both regular tax liability and the AMT |
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The amount of AMT paid (net of exclusion preferences) is allowed as a credit against what? |
Against regular tax liability in the future (not future AMT liability) Can be carried forward indefinitely
Carry forward amount = excess of the AMT paid over the AMT that would be paid if AMTI included only exclusion preferences |
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If it's not an adjustment or preference, |
it's deductible/includeable for both AMT and regular tax |
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AMT is computed as |
excess of tentative minimum tax over regular tax |
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Schedule C location rule |
if there's another schedule you can show it (personally), don't show on schedule C (business), show on the other schedule |
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Self employed people |
Sole proprietor Independent contractor General partner in partnership |
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Self employment income doesn't include |
Personal interest Dividend income (put on Schedule B, not C) Rental income (put on Schedule E, not C) |
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No self employment tax is computed if |
net earnings from self employment are less than $400 (no need for Schedule SE) |
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Self employment tax deduction |
Can normally deduct one half of self employment tax to arrive at AGI |
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Guaranteed payments from partners (not dependent on partnership income) are treated as |
Income Subject to self employment tax |
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Ordinary income from an S corporation - self employment or corporate income? |
Corporate |
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Director's fees - self employment or corporate income? |
Self employment |
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Child and dependent care credit amount |
20% to 35% of the amount paid for qualifying household and dependent care expenses incurred to enable to be gainfully employed or look for work |
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Eligibility requirements for taking a child and dependent care credit |
a. Expenses must be incurred on behalf of a qualifying individual and must enable taxpayer to be gainfully employed or look for work
b. Married must file jointly. If divorced or separate, credit is available to parent have longer custody during the year
c. Qualifying individual must have the same principle place of abode as the taxpayer for more than 1/2 the tax year |
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Qualifying individuals for child and dependent care credit |
1. Taxpayer's qualifying child 2. Dependent or spouse who is physically or mentally incapable of self care |
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Are expenses incurred outside taxpayer household a qualifying expense for child and dependent care credit |
Yes, if incurred for a qualifying individual who regularly spends at least eight hours a day in taxpayer's household |
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Are payments to a child under nineteen a qualifying expense for child and dependent care credit |
No |
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Are payments to a relative a qualifying expense for child and dependent care credit if the taxpayer is entitled to a dependency exemption for that relative |
No |
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Maximum amount of expenses that qualify for credit is |
Least of: Actual expenses incurred, or 3,000 (one person that qualifies you) or 6,000 (two or more), or The taxpayer's earned income (or the spouse earned income if smaller) |
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Tax effects of foreign taxes on foreign income |
Either a. Itemized deduction, or b. Compute foreign tax credit |
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Earned income credit |
Refundable credit for low income workers Usually qualified by qualifying child |
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Child tax credit |
You get a credit of 1,000 for every qualifying child
Qualifying child - US citizen or resident who is the taxpayer’s child less than 17 years old at year end
Phased out if AGI is above certain limit |
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Is child tax credit refundable? |
Part of it is refundable, part of it is not |
