Income Tax - Other Income And Tax Credits

Front 1

Explain the Lifetime Learning Credit

Back 1

20% of first $10K of tuition. 2013 phaseout MFJ=$107K-$127K; S=$53K-63K. Cannot be taken with American Opportunity Credit (hope). Credit is for both degree and nondegree.

Front 2

How does the child tax and child care credit work?

Back 2

Expenses capped at $3K for one child and max of $6K. Has sliding scale credit %: 35% if AGI <$15K; 20% if AGI > $43K. Has phase out. Child must be less than 13
CHILD TAX=$1K for each child. Credit is reduced by $50 for each $1K above threshold Threshold same as for child care credit For child tax credit Child must be dependent and <17 years old. Expense cannot exceed earned inome

Front 3

Give some examples of other tax credits

Back 3

Adoption=$12,970/child. Can't adopt spouse' child or surrogate costs
Foreign taxes--can be credit or deduction

Front 4

What is a nonrefudable tax credit

Back 4

Tax liability can be reduced to zero. they do not create a refund Should be taken out before the payments.

Front 5

What DOESN'T the American Opportunity Tax Credit cover

Back 5

room and board. The credit is 100% first $2000 and 25% of next $2K. Max is $2.5K. cannot be used with life time learning credit for same individual. covers first four years of college. u do dope no opportunity
Phaseouts

Front 6

What is the lifetime learning credit

Back 6

available for tuition and fees for college or professional degree programs. May caim 20% of expenses up to $10K Max $2K. Student must be enrolled at least half time unless taken to acquire or improve job skills. Not available for MFS. No double dip with Sec 529 Phaseouts

Front 7

Can a tp claim the AOTC credit or the Lifetime Learning Credit and also exclude from gross income amounts distributed from a Coverdell ESA on behalf of the same student

Back 7

Yes, if ESA distribution is not used for the same educcational expenses for which a credit is claimed.

Front 8

What is a tax recovery

Back 8

return of money--refund, reimbursements, rebates of deductions

Front 9

What is the lower base amount for calculating taxability of SS

Back 9

S, HOH, QW, MFS=$25 MFJ=$32, MFS=0. Taxable portion is between 50% and 85%
A tp reports SS benefits on line 20 a and taxable amount on 20b

MAXIMUM Taxable =85%

Front 10

When is a scholarship excluded from income

Back 10

tp is a degree candidate, schlorship does not exceed qualified expenses, it is not designated for other purposes such as room and board, it does not represent a payment

Front 11

Is an appointment to us military academy a scholarship or fellowship

Back 11

No

Front 12

How are distributions from a sec 529 plan treated

Back 12

They are reported on 1099. The part of the distribution representing amount paid or contributed is not included in come The beneficiary also does not include any earnings distributed if the total distrubition is less than or equal to a students qualified education expenses

Front 13

What are qualified education expenses

Back 13

tuition, fees, books, computer equip and software and room and board

Front 14

What are typical types of other income that is included on line 21

Back 14

cancellation of debt gambling winnings, hobby income, certain court awards, prizes, jury duty pay

Front 15

What is a nonrecourse debt

Back 15

a loan secured by collateral but which the borrower does not have liability for the loan. Many mortgages are nonrecouse

Front 16

When is cancelled debt not taxable

Back 16

When tp is insolvent, bankruptcy, certain student loans, qualified farm business, home mortgage

Front 17

What is HAMP Home Affordable Modification Program

Back 17

Helps financial distressed ho lower monthly mortgage payents. If ho continues to make payments for 3 years, mortgage can be reduced by a predetermined amount and the loan holder is reimbursed. Borrower may exclude the discharge of debt if
the mortgage loan is QPRI and the modification was made before 1/1/2014 OR
The discharge of debt occurs when the tp was insolvent

Front 18

If the canceled debt would have been a deductible expense, should it be recognized as income

Back 18

No for cash basis tp

Front 19

When should a W2G be issued

Back 19

for gambling winnings $600 or more, $1.2K bingo or slot, $1.5 kino, any amounts subject to federal w/h

Gambling losses reported on sch a not subject to 2% floor

Front 20

Are court awards for compensation for lost wages taxable

Back 20

yes. But compensatory damages are not.

Damage for emotional distress are taxable as ordinary income--however medical care related to emotional distress is not taxable.

Front 21

Are prizes and awards taxable

Back 21

Usually---but EE awards for safety, service or achievement are not unless they exceed specified liits

Front 22

What other types of income may be put on line 21

Back 22

strike benefits, jury duty pay, executor fees, taxable distributions from qualified education plans, gifts received by a sales party host.

Front 23

How do you determine if insolvency will affect the taxability of canceled debt

Back 23

If the amount of insolvency immediate prior to debt cancellation exceeds the amount of debt discharged, the debt cancellation is not taxable.

Front 24

What is QPRI (qualified principal residence indebtedness) and what is the maximum amount

Back 24

QPRI cannot be more than the cost of the home plus improvements The maximum amount that can be treated as QPRI is $@ million MFJ and $1 million otherwise. If only part of the loan is QPRI, the exclusion of loan cancellation is limited to the QPRI

Front 25

What are some peculiarities regarding alimony

Back 25

If they are received after spouse dies, they will automatically be considered child support. If alimony includes property and the property is jointly owned, only 1/2 would be included in alimony

Front 26

What are the two refundable tax credits

Back 26

EIC and Additional child credit

Front 27

What are the test for child care credit

Back 27

qualifying person earned income(both spouses must work); work related expense; joint return (must file MFJ); provider identification test

cannot include caretakers under 19 or dependents who are caretakers

Front 28

What is the child tax credit

Back 28

tp with income below threshold may claim a child tax credit for each child under 17. The credit is nonrefundable up to $1K per child.

Thresholds=MFJ $110K, S=$75K, MFS=$55K The credit is phased out by $50 for each $1000 of MAGI above thresholds

Front 29

What is the additional child tax credit

Back 29

The additional child tax credit is available for tp who do not qualify for the full amount of the nonrefundable child tax credit. TP must be able to claim child tax credit--even if tp cannot take full amount(tax is less than credit) The additional child tax credit is refundable up to $1K for each child

Front 30

What is the adoption credit

Back 30

$12,970 adption expenses per child. Exp does not included surrogate illegal or spouses child. Expnses

Front 31

Which form is used for the American opportunity credit and lifetime earning credit

Back 31

Form 8863. Expenses do not inlude room and board medical, insurance, transportation, living expenses

Front 32

What is the American Opportunity Credit

Back 32

PER STUDENT Max $2.5K or 100% of first $2000 and 25% of next $2000 for first four years of education--no drugs, full workload and degree requirement. Phases out $160-$180 MFJ, and $80-90K S

Front 33

What is the lifetime learning credit

Back 33

20% of tuition max $2K--no workload requirement, n0 degree, unlimited number of years

Phase out S=$53-63, MFJ=$107-127K

Front 34

What is the EIC

Back 34

Mus have SS number; earned income, investment incomemust not exceed $3.3K, citizen and not a depenent. Earned income does not include alimony, pensions, unemployment, inmate wages, workfare payments, SS benefits

Front 35

What are the age limitations for EIC for a tp without a qualifying child

Back 35

Must be 25 or older,live in us,no foreign income

Front 36

What are the EIC income limits

Back 36

$46,227 3 kids
$43038 2 kids
$37,870 1 kid
$14,340 no kids

If not done correctly--banned for two years
If done fraudulently banned for 10 years

Front 37

What is the retirement savings contributions credit

Back 37

$1K for S and $2K for MFJ cor contributions to IRA. Amount of credit is contribution x credit rate based on AGI status

Lowest credit is 10% and highest is 50%

Front 38

Who is eligible for the retirement savings credit

Back 38

18 not a full time student or dependent, agi must not exceed $59K MFJ, $29/5=s. $44,250 hoh

Front 39

For what will a tp receive residential energy credits

Back 39

solar energy systems, fuel cells, small wind energy systems, gothermal heat pumps. Credit i 30%
For nonbusiness energy property credit the Credit can be 10% of cost The total amount is $500 for all tax years after 2006

Front 40

What other energy credits are available

Back 40

plug in electric vehicles at 10% and alternative fuel vehicle property at 30%

Front 41

What is the adoption credit for a special needs child

Back 41

the max even if expenses were less than max

Front 42

Are fees and deposits paid to a daycare agency included in qualifying child care expenses

Back 42

Yes

Front 43

If a student goes into 5th year for a 4 year degree program can the AOC credit be claimed

Back 43

no