Individual Taxation まとめ

こんにちは。今日の関東、雪 のはずが、大きく外れて一日中雨でした。。 富士山の麓で育った私にとっては物足りない。。。というより淋しいです やっぱり冬は雪がドカンと降らないと穏やかな春が来ないような気がします 

今日は、私のWeakerであったIndividual taxation のまとめを載せます まとめというよりは、間違えたところを単に書いてみたといったところですが。 意地になってやったせいか、今はそんなに苦手意識はなくて、むしろ変化があって好きかもしれないです~ いろんな論点が絡むところは、頭の体操になって慣れると楽しいかもしれないですね

今日は長いですよ~ 何日かかけてまとめたものです。何度も何度も間違えたところは何度も登場するかもしれないですが、淡々と読んでみてください 


■Forfeited interest penalty

Deduction from gross income in arriving at adjusted gross income (Adjustment)

■Capital loss

Up to $3,000 of a capital loss may offset other gross income, excess may be carried forward indefinitely

■Interest income

Interest on state government obligations is excluded from gross income

[Taxable on income tax return]

  • Interest on federal income tax refund

  • Interest on state income tax refund

  • Interest on federal government obligation

■Withdrew traditional IRA contiribution

Marginal tax rate + 10% addtional

IRA deduction – Age 50 or older

  • General: A qualifying employee with a deduction up to the lesser of $5,500 in 2014 or an amount equal to the compensation includible in the employee’s gross income for the taxable year.

  • Age 50 or older: This limitis increased by $1,000 for taxpayers who are at least age 50 at the end of the year.

■Employee moving expenses

Fully deductible for AGI (Adjustment)

■AMT add back items

  • Home equity loan interest unrelated to acquisition

  • Real estate taxes

  • State income taxes

  • Miscellaneous itemized deduction subject to 2% AGI threshold limitation

■AMT deductible

  • Miscellaneous itemized deduction Not subject to 2% AGI threshold limitation

  • Medical expenses (10% threshold)

  • Residence mortagage interest

  • Charitable contributions

■Adoption credit

Up to $12,970

■Self-employment income

Director of a corporation is included

■Charitable property contribution

  • ST – Lesser of Basis or FMV

  • LT- FMV

*Up to 30% of AGI  

* Charitable contributions are subject to the phase out of the amount of certain itemized deductions that may be claimed by high-income individuals

■Passive activity loss

Passive losse は当該 partnership interest などを売却するなどした時点でRealize するという前提なのでOrdinary income と相殺することができる

  • Limited partnership loss is PAL (passive activity loss)

  • Losses from rental real estate are PAL

・原則:$25,000までOrdinary income と相殺できる

・例外:AGI が$100,000を超えたら、その超えた分の50%分だけ相殺できる額が減少する

■Tax payments

$150,000 以上のTaxable income のある人は去年のTax liability の110%以上を支払う必要がある(Taxable income の110% ではない)

■Investment income

Investment income 10,000

Investment expenses (8,000)  non interest expense


                                    2,000  ←この範囲でのみinvestment income をdeduction することができる

■Section 1244 – Qualified small business investment stock

Up to $50,000 / year までordinary loss として控除できる、残りはCapital loss として取り扱う

■Tuition payment – Gifts

“Payment made for family member” は関係ない

■IRA contribution

If neither married taxpayer is an active participant in an employer-sponsored plan, both are eligible to deduct (Adjustment) the full amount of their regular IRA contributions, regardless of income levels.

*Total IRA contributions for 2013 may be up to $5,500 for most taxpayers. Taxpayers who are at least age 50 by the end of the year may contribute an additional $1,000.

*If one spouse is covered by an employer pension plan, and their AGI is greater than the active participant phase-out limit, then the participating spouse’s deduction is disallowed.(どちらも充たした場合にはDeductionはできない)

■Personal residence

Married taxpayers generally may exclude up to $500,000 ($250,000 each person) of gain from the sale of a personal residence provided they occupied the home in two of the five previous years.

■Itemized deduction – Real property taxes

Local, state, and foreign real property taxes on a residence are deductible by the cash-basis taxpayer upon whom they are imposed in the year in which they were paid

■Itemized deduction – Unreimbursed education expenses

Employees are allowed to treat unreimbursed education expenses as a miscellaneous itemized deduction subject to the 2% of AGI limitaion. The education must be to maintain or improve a skill required in the individual’s employment or meets the express requirements of the employer or laws or regulations.

■Itemized deduction – Health insurance preiums

For tax years starting after 2012, qualified medical expenses are deductible on Schedule A subject to a 10% of AGI floor. Health insurance premiums are a qualified medical expense.

■Child care credit

A child care credit of between 20% and 30% of eligible expenses is available up to a maximum of $3,000 for one qualifying dependent

■Non taxable interest / dividend income

・Interest income on general obligation state and local government bonds are not taxable

・Dividend income from mutual funds that invest in tax-free government is not taxable

■Taxable interest income

・The interest income from a refund of federal taxes is an example of interest income which is taxable on Schedule B

■Sole proprietorship

A sole proprietorship is not a separate entity for tax purposes. Interest on a checking account used for a trade or business that is a sole proproetorship is reported on page 1 of Form 1040 as personal income

■Schedule B – Dividend, interest income

Interest income from a refund of federal taxes

Interest on U.S. Treasury bonds

Distribution made in lieu of money

■Schedule E – Passive income / expenses (Rental income / expenses)

Rental expenses include bank mortgate interest, real estate taxes, insurance, MACRS depreciation.

Income from Royalties, partnerships, S corporations, Estates and Trusts

■Home equity indebtedness

Home equity indebtedness is limited to $100,000 on a joint income tax return ($50,000 if MFS)

■Death benefit

As beneficiary of the death benefit provided by the decedent’s employer, should be included on page one of the beneficiary’s Form 1040

■Series EE bond interests

If the proceed is used for a non-dependent tuition, the income should be included in taxpayer’s gross income

■Medical expenses

The threshold for medical deductions for taxpayers age 64 and younger is 10%, rather than 7.5%

■Deductible losses

Section 165(c) allows an individual to deduct losses only on business property, investment property, and losses on personal use property from casualty or theft

■Tax payment

In order to avoid a penalty, taxpayers must pay the lesser of either 90% of the current year’s tax, or 100% of the prior year’s tax, unless AGI is more than $150,000. (AGI from $150,000 110% tax payment is required )

■Early withdrawals from IRA contribution

General: Withdrawals from IRA’s before the owners meet the age requirements are subject to regular income tax plus an early withdrawal penalty of 10%, without regard for the use of the money.

■Earned income credit is a refundable credit for low-income taxpayers who meet certain conditions

■Self-employment taxes

The portion of the self-employment taxes paid by an individual corresponding to an employer’s share is deducted on Form 1040 for AGI

■Casualty losses

A casualty loss must be due to a sudden, unexpected, or usual cause. Damage due to termites is not sudden

■Medical insurance premiums

Medical insurance premiums paid with after-tax dollars are qualified medical expenses

■Mortgage interest

Mortgage interest paid on rental property is not reported on Schedule A. Instead, it is reported on Schedule E.

■Qualified interest expense is deductible as an itemized deduction without a specific limitation based on AGI

■Medical expenses

Over-the-counter drugs are not deductible

■Filing status – Married with dependent child

The year of spous’s death: Married joint return

Year X1: Qualifying widow with dependent child

Year X2: Qualifying widow with dependent child

Year X3: Head of household

■Statute of limitation – Assessment by IRS

General: Three years from the later of the actual filing date or the due date

■Deductible moving expenses

“Cost of moving you (travel expenses, lodging expenses etc.)  and household goods” only!


Add back:

  • State and local taxes,

  • Other miscellaneous subject to 2% of AGI

  • Personal exemptions


Mortgage interest deducted on Schedule A

Traditional IRA account contribution

One-half of the self-employment tax deduction

Charitable contributions

Casualty and theft losses

Medical expenses must exceed 10% of AGI, not 7.5%

■Capital gain

Capital gain は$3,000 のcapital loss 以上に発生したらAGIに含まれる

■Interest on student loan

Interest on student loan はAdjustment で引く

■Adjustment elements ★

・Alimony paid

・Jury duty remitted

・Forfeited interest

・Moving expenses

・Education loan interest (Student loan interest)

・Medical saving accounts

・Self-employment taxes

・IRA contribution

・Keogh plan

・Self-employment health insurance

・Capital losses in excess of capital gains

・Trade or business expenses

Itemized deductions

  • Unreimbursed Business expenses (Subject to 2% of AGI floor)

  • Tax return preparation fees (Subject to 2% of AGI floor)

  • Charitable contributions (Qualified ATM)

  • Residence mortgage interest (Qualified AMT)

  • Medical expense using 7.5% or 10% AGI floor

  • Gambling losses to the extent of gambling winnings (Not subject to 2% AGI floor)

  • Real estate taxes (Not subject to 2% AGI floor)

  • Employee moving expenses (fully deductible for AGI)

  • Home equity indebtedness is limited to $100,000 on a joint income tax return (Home equity indebtedness may not exceed the taxpayer’s net equity in the qualified residence)

■Forfeiture penalty

Forfeiture penalty for early withdrewal paid in the next year before filing tax return of previous tax year is deductible from gross income in arriving at the year paid AGI

■Casualty losses

Reduce the casualty loss by $100 for each casualty

■Home loan interest deduction

$1,000,000 of home loan interest is deductible

■Education expense

Education expense to meet minimum entry level education requirements at an individual’s place of employment

■Distributable Net Income (DNI)

< span style="font-size: 15px; vertical-align: baseline; white-space: pre-wrap; background-color: transparent;">Up to DNI is deductible

eg) DNI: $15,000, paid $9,000 →$9,000 deductible

■Donation (Charitable contribution)

A charitable contribution deduction is not allowed for the value of services rendered to a charity

■Rental (Active) loss

General: Active participant によるRental loss は up to $25,000 deductible

Exception: AGI > $100,000 excess of the threshold x ½ が$25,000 から引かれる

■Like-kind exchange

Real property → Real property

Personal property → Personal property

■Section 1231 property

Depreciable personal property eg) machine, equipment use in business, real estate use in business) Held more than one year. Recapture などは一切考慮しない

■Passive losses★

If the taxpayer is active participant, up to $25,000 is deductible. Exception: more than $100,000 AGI, the ½ of excess amount should be reduces the threshold ($25,000)

Example) Partnership interests, Active participant’s rental income

■Section 1244 loss vs. Capital loss

Section 1244 loss (ordinary loss) と Capital loss が同時に発生した場合には両者は相殺することはできない。Section 1244 (Qualified small business stock) はあくまでordinary loss

Up to $50,000 / year deductible, excess of $50,000 should be treated as capital loss

■Suspended losses

eg) Passive losses: Any losses in excess of the at-risk amount are suspended and carried forward without expiration and are deductible against income in future years from that activity.

■DNI (Beneficiary)

Up to DNI, taxable

The excess of DNI, not taxable (return of capital)

■Statute of limitation – tax refunds

Filed tax returns: Three years

Not filed tax returns: Two years

■Installment sales

Gain is recognized partially that portion of money received.

■Earned income

Net self-employment income – (Deductible Keogh contribution + portion of the self-employment tax) = Earned income

■AMT preference (not included gross income)

・Section 57(a)(5)(A) treats interest on specified private activity bonds as a tax preference for purposes of the alternative minimum tax.

Not itemized deduction for AMT purposes

・State income taxes

・Mortgage interest unrelated to acquisition

・Real estate taxes

■Earned income tax credit (EIC)

To claim EITC, you cannot be “married filing separately”. Married taxpayers must file jointly to qualify for the earned income credit (EIC).

■Qualified relatives

[First four tests]

  • Gross income

  • Support

  • Joint return

  • Citizenship or residence

[Fifth test -relationship or member of household]

  • Cousin and Foster parent are excluded

*In-laws are not related parties

■Life insurance proceeds

Gross income does not include life insurance proceeds.

■Capital gain

There is no capital gain deduction for corporate or individual taxpayers.

■Business losses

A deduction is allowed for any debt which becomes totally worthless during the year. However, the deduction is allowed only with respect to debts that represent items which have been recognized previously as taxable income. A cash-basis taxpayer does not recognize income until payment is received. Since the fee was never recognized as income, no deduction is allowed when debt becomes worthless.

■Ad valorem tax

従価税:Itemized deduction