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12 Cards in this Set
- Front
- Back
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Formula for Calculating Federal Income Tax
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1. Gross Income
2. Above the Line Deductions ----------------------- Adjusted Gross Income (AGI) 3. Below the Line Deductions ----------------------- Taxable Income 4. Multiply by Tax Rate (Ordinary is 35%, Capital Gains 15%). 5. Subtract Credits. |
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How do define what goes into gross income?
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Economic Benefit or Clearly Realized Accession to Wealth.
In short you got richer. |
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What is included in Gross Income (Not exhaustive)?
(When in doubt its usually gross income). |
RNC PrTCL (The Total Gross Income at the Republican National Convention is Practically the Whole Country's wealth).
Realized Wealth. Non - Cash Receipts Claim of Right Prizes and Awards (Lottery) Tax Benefit Rule Cancellation of Debt iLlegality |
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What are the Above the Line Deductions?
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OD CAMeL
Ordinary and Necessary Business Expenses Depreciation of Assets Capital Losses (3k cap). Allimony Moving Expenses Loan Repayment Interest for Certain School Loans |
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When Above the Line Deductions are made what results?
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The Adjusted Gross Income.
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What is the choice for Below the Line Deductions?
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To either take the standard deduction, or to go with an itemized deduction.
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For the 2013 year the Standard Deduction was _____ for singles without dependants?
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6100.00
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What are included in Itemized Deductions?
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ChUM CyLe
1. Charitable Contributions (501c3, FMV of cash and goods). 2. Unreimbursed Business Expenses (Anything that was incidental to making money that was above 2.5% of AGI), 3. Medical Deductions above 7.5% of AGI. 4. Casualty Loss Insurance (Excess of 100k, minus 10% of AGI). |
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What is included in Below the Line Deductions and what is the result?
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Itemized or Standard Deduction,
Dependant Exemptions (50% or greater support 3900). The result is Taxable Income. |
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What is the difference between accrual and credit methods of accounting?
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1. Accrual - Realization happens for tax purposes when the right to take or pay vests. (Most Businesses)
2. Cash - You pay and receive payments on a transaction by transaction by basis. |
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What are the two tax rates and names?
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Ordinary - 35%
Capital Gains - 15% |
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What are exceptions to Gross Income?
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GILTEE
Gifts Inheritance Life Insurance Benefits Tort Awards Employee Related Expenses |
