Professional Documents
Culture Documents
Bad debts
Deduction limited to accounts receivable or
income reported on sales that is no longer
collectible (business) (Ordinary deduction) [Line
27a]
Non-business Bad Debt
May claim $3,000 S.T. capital loss and carry
remaining forward
Capital Losses
nonbusiness bad debts. Limited to $3,000
deduction against ordinary income in current yr.
Excess unused deduction may be carried
forward. [Line 13 1040] [Sch. D]
Gifts
NOT included [unless in business setting]
Car Mileage
rate .565 x business miles commuting and
nonbusiness (both nondeductible) mileage
reported in PART IV Sch. C [Line 9 Sch. C]
(Included in the standard car mileage rate is
gas, oil, insurance, repairs, maintenance, and
depreciation. ADD toll fees and business parking
to total after .565 x miles calculation) [Line 9]
Inheritances
NOT included
Lodging
100% deduction [Line 24a] Travel Expenses
include: airfare, laundry, taxi, hotel
Business Gifts
may deduct $25/done (husband+wife=1
donee). NOT deductible if taxpayers
supervisor/higher-level. Incidentals like
giftwrapping not subject to $25 ceiling [Line
27a]
Hobby Losses
expenses are deductible. May NOT show a loss
for a hobby/personal enjoyment. Any profits
from hobbies must be included in taxable
income. [Line 21] Can deduct expenses
otherwise on Sch. A
Not a hobby 750 (200 460 250)
= 160 loss against income
Income^ - ^depr. ^supplies
taxes personal property
Hobby 750 250 = 500 income depr. and supplies (only 500 deductible
^Automatically deductible on Sch. A
Other Income
[Line 6 Sch. B] of business
Mortgage interest of business
[Line 16a Sch. C]
Rental Income
taxable and reported on [Line 3 - Sch. E] [Line
17 1040]. Take monthly rental income x 12,
less expenses (ie. Real estate taxes, mortgage
interest, depreciation, home owners dues,
utilities, etc.)
Vacation homes
Rented<15 days: nondeductible personal
expenses (mortgage interest and real estate
taxes allowed on Sch. A itemized reductions).
Rented>14 and used for personal < 10% of
days rented, whichever is greater, deductions
NOT limited to income and may take a loss.
[Sch. E] Rented > 14 days and used for personal
> 10% days rented, or 14 days whichever is
greater, allocable rental expenses to the extent
of income. PERSONAL PORTION of interest and
taxes to personal use of property is deductible
on [Sch. A]
Passive Loss Limitations
passive losses (i.e. rental real estate income
and LLP) cannot be used to offset either active
(wages, self emp income) and portfolio income
(dividends and interest). Unused passive
losses/credits are carried over. May deduce
$25,000 of rental property losses against other
income. If AGI (before IRA and passive, or rental
losses: modified AGI [Line 17]) > $100,000,
the amount that exceeds 100k is multiplied by
50% and subtracted from 25,000. [f. 8582]
Real Estate Rental as Trade/Business Considered active if > 750hrs of service and
> 50% personal service. In this case, can
deduct a loss.
Self-employed Health Insurance Deduction
can take deduction for medical and dental
insurance for taxpayer, spouse and dependent
children, children under 27, medicare
premiums, long-term care subject to limitations
(a table) [Line 29]
Health Savings Account Contributions to
HSAs are a deduction to AGI and limited to
certain $ amounts depending on age and
whether covers family or individual. Earnings
and unused contributions are not taxed. Also
carried forward. Once individuals qualify for
Medicare (age 65) not allowed to contribute to
HSA. [Line 25]
Depreciation
Cost basis minus election to expense, max of
five hundred k, equals depreciable amount. Plus
bonus depreciation, half of depreciable amount,
plus regular depreciation, MACRS x other half of
depreciable amount and limited to income.
Straight-line Depreciation
Cost basis minus salvage value divided by total
# of months multiplied by months left in the
year
Accrual-basis Income
Ordinary Income
Sales Less salaries, rent, depreciation, etc.
Income that needs to be separately
reported
Gain on sale of business property, interest
income, charitable contributions, partner
distributions, foreign tax, etc.