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What are common exclusions to gross income:
- LIfe Insurance
- Inheritance (but not the income on such property)
- Damges for personal injury
- Gain from sale of personal residence
- Education expenses
- Fringe benefits
What are the most common items that are deducted from gross income to determine adjusted gross income?
- 1.Business expenses
- 2.Capital Losses
- 3.Deduction from rents and royalties
- 4Contributiosn to apporved pension plans and retirement plans
- 6. Moving expenses
- 7. Expenses fro higher education and interest on higher education loans
What is the formula to determine total tax liabiltiy?
Gross income - excusions
- - above the line deductions (business expenses etc.)
- This number will then comprise adjusted gross income
- Adjusted gross income - below the line deductions
- this equals taxable income
- Taxable income times tax rate - credits
What are below the line deductions?
They are subtrated from ajusted gross income to determine tax liability. It is either the standard deduction or if greater, an itemized deduction.
What can comprise itemized deductions:
Interest on loans up to 1 million
State local real property taxes
Non business losses
Charitable contributions up to 50 of AGI.
Miscellaneous itemized deductiosn to the extent that they exceed 2% of a tax payers AGI.(expenses of profit seeking ventures, educational expenses, employees meals and lodging, transportation, except ordinary commuting expenses.
What comprises capital gains?
Sale of: any property except
- 1. Inventory or other property held primarily for sale to customers
- 2. Depreciable property used in the trade or business
- 3. A copy right
- 4. Accounts or notes recievable
- 5. Supplies
What is the captial gains tax rate?
- 15 percent or
- 28 percent for collectables
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