[REG] Below the line deductions(deductions for AGI)

Standard deduction / Itemized deduction, whichever is larger

Filing status determined on December 31 of each year

1) Single

2) Married filing jointly

    joint return cannot be filed if the husband and wife have different taxable years

3) Married filing separately

4) Qualifying widow with dependent child(Surviving spouse,SS)

   - Qualifying widow > + 2years spouse died

         * joint return tax rates for > spouse died, year after, 

   - Dependent child has to live together all year, except for temporary absence

      (medical care, education, vacation, military service)

   - pays more than 1/2 of the cost of maintaining household

O	X
rent, mortgage int, property taxes, home insurance, repairs, utilities, food	clothing, education, medical&dental care, vacation, life insurance, transportation, rental

  - Surviving spouse did not remarry

 

5) Head of household(HH)

- Unmarried individual, provides a home for qualifying persons who live in the home for more than 1/2 of Y

- pay more than 1/2 cost of maintaining household

- unmarried child no dependent test + married child/foster child/relatives(3촌이내) dependent test

5 Dependent test 

a. citizenship

b. related(3촌) or member of household

    related or live together for the entire year

    *related person: lineal ancestors, descendants, brothers/sisters, uncles/aunts, nephew/nieces,

                               step, inlaws, foster child

    *Child: under 19, under 24 for full-time student, handicapped child + live together for than 1/2 Y,

               except temporary absence(medical care, education, vacation, military)  

c. No joint return

d. Gross income less than $4,700

    * gross income limit does not apply to children under 19 / full-time students under 24

e. Support

   - more than 1/2 should be provided

   - support: food, clothing, lodging, education, medical, recreation, transportation

    * multiple support agreement: more than 10% of support can claim a dependent exemption(한명만 쓸수있음)

 

 

Standard deduction

Basic standard deduction

27,700 MFJ, SS

20,800 HH

13,850 S, MFS

 

Additional SD for old age or blind

unmarried 1,850 for either age 65/blind

married 1,500 for either age 65/blind

 

SD of the dependent individual

Greater of (1) $1250 or

                (2) earned income +400

 

Itemized deductions(sch A)
모든 항목에 다 limitation이 있으니 주의할것!

 

Sch A

1. Medical and Dental expenses

 Medical expenses, exceed 7.5% of AGI > deductible  

    - Qualified unreimbursed medical expenses: doctor prescription, prescribed medicine

   * non-deductible exp: funeral/ burial expenses/ normal baby care/ general health care

   * medical expense deduction is allowed for medicare insurance premiums

   * deduction is allowed for payments made in the current year for medical services received in earlier years

     (지급시점이 아니라 청구시점이 중요한듯 하다)  

 

2. Taxes

The amount of deduction is limited to $10K, following

- State, and local income taxes or Sales tax paid

- Property taxes(state and local)  paid ( real property tax, personal property tax ), Paid&Owned

- foreign income taxes

* non-deductible taxes: estate/gift tax, rental property tax, social security tax paid by EE....etc

 

3. Interest Expenses

  1) Qualified residence interest

     - int on loans(mortgage int) used to acquire/construct/substantially improve first and second home

         * used for at least 14 days in a tax year qualifies as a "second home"

     - up to 750K MFJ

 

  2) Investment interest

     - deduction of int limited to the amount of net investment income(int, dividends, STCG, Royalties, NLTCG)

     - Excess int is carried forward indefinitely

 

   * int exp related to biz, deductible either in Sch C(trade or biz) or in Sch E(rental)

   * personal interest not deductible

   * penalty on prepayment of mortgage is treated as mortgage interest

 

   3) prepaid int, allocate to the proper period

 

 

4. Charitable Contributions (Sch A)

1) Paid to qualified org: educational, charitable, religious

2) Amount of contribution: cash, check, credit card, property

3) Contribution and deduction limit

Type of contribution	Amount of contribution	Deduction(public charities, private operating foundations)	Private nonoperating foundations
Cash	Cash	Up to 60% of AGI	30% of AGI
Inventory/STCG property if FMV < Basis	lessor of Basis FMV	Up to 50% of AGI Up to 50% of AGI	30% of AGI
LTCG property if  elected to use basis or tangible personal property in unrelated use	FMV Basis, if >FMV	Up to 30% of AGI Up to 50% of AGI	20% of AGI

* Private nonoperating foundation: distributes founds to other charitable org

- excess charitable contribution over the limit is carried forward for 5 consecutive Yrs

- if the donor receives, deductible= paid - FMV of benefits received

- out of pocket(실제지출되어야함) and unreimbursed expense are deductible

- 학생지원(not dependent, relative, in taxpayer's home, not betyond 12th grade) limit to $50/m

* non-deductible: paid to foreign, communist, political organization, value of taxpayer's time or service, blood donated

 

5. Casualty loss on personal-use property

1) Natural disaster

 

2) formula

    FMV before casualty

  <FMV after casualty>

  Casualty loss

<insurance reimbursement>

  Net casualty loss

<$100 per casualty>

<10% of AGI>

  Deductible Casualty loss

* Lower of decline in FMV or adj Basis가 , 계산(실비정산금액 아님)

 

6. Other itemized deduction

- Gambling losses are deductible to the extent of gambling winnings

- Nondeductible personal expenses: home repairs

 

Refund of expenses

refund of the prior year's state and local income taxes paid > reported as other income

 

 

Tax benefit rule

Deductible expenses in prior years' return > Income in the year of refund > SIT refund_sch1 line1:taxable refund

                                                                                                                       all other expense_sch1 line8: other income

 

 

Regular and other taxes

 

other taxes

a. Self employment tax(shc SE & form 1040, Sch2, line4), 15.3%

   * $400 or more, subject to SE tax

b. Additional tax on IRA, other qualified retirement plans

   - early withdrawal tax: 찾는 금액의 10% penalty

c. Net investment income tax(medicare contribution tax)

3.8% on the lesser of (1) net investment income (2) excess of AGI over a threshold amount(MFJ$250K, single $200K)