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Unformatted text preview: Becker – 2009 Edition Chapter 2 Page 1 of 11 Chapter 2 – Adjustments and Itemized Deductions Adjustments (Deductions) to Gross Income to arrive at AGI – Above the line deductions Educator Expenses- Deduct up to $250 of qualified expenses paid (or $500 for married, both are educators) - Eligible: KG to 12 grade teacher, instructor, counsellor, principal, or aide in school for at least 900 hours a year - Reduce qualified expense amounts by: o US series EE and I savings bond interest, non-taxable state tuition, non-taxable Coverdell Savings Traditional Deductable IRA - Contribution = deductible in the year contributed - Earnings = tax deferred - Distributions/Withdrawals = taxable contribution and earnings - Cannot deduct contribution if BOTH of the following are present: o Excessive AGI 2008: S/HofH – 53-63,000 MFJ: 85-105,000 o Active participation in another qualified plan - No deduction if: Rich and Have retirement plan o Exception: if one spouse isn’t is not active participant, then that spouse can still deduct contributions o Phase-out: if only one spouse actively contributes, then second spouse phase-out limit for contribution is MAGI: 159-169,000 - Amount of deduction: LESSER of: $5,000 or individual’s compensation (His + Hers = Theirs) - Maximum contribution for MFJ total deductable contribution: $10,000 - Compensation: salary, commissions, alimony (not incl. PALs and pension) - Catch-up contribution: Age 50 or over = contribution extra $1,000 - Retirement plan contribution credit ??? - MUST See chart on page R2-7 Roth IRA- Contributions = non-deductible - Earnings = tax-free - Distributions/Withdrawals = tax-free contribution and earnings - Contribution limits – combined with all IRAs = $5000/person - Phase-out: S MAGI: 101-116,000 MFJ MAGI: 159-169,000 MFS MAGI: 0-10,000 - Retirement plan contribution credit ??? Non-Deductible IRA - Contributions = non-deductible - Earnings = taxable - Distributions/Withdrawals = tax-free contributions and taxable earnings - Contribution limitations: - LESSER of: $5,000 or individual’s compensation Coverdell Education Savings Accounts (Education IRA) - Contributions = non-deductible, maximum limit $2,000 annually - Earnings = tax-free - Distributions/Withdrawals = tax-free contributions and earnings if used for qualified education expense (includes elementary and secondary school expenses) - Beneficiary must use by age 30, otherwise: o Distribute to beneficiary = taxable and 10% penalty o Rollover to family member = tax-free and no penalty - Designated beneficiary must be under age 19 - Maximum contribution per beneficiary is $2,000 annually - Phase-out for MAGI – S:95-110,000 M:190-220,000 MUST SEE chart on page R2-10 – it includes the IRA Contribution and Withdrawal Summary Becker – 2009 Edition Chapter 2 Page 2 of 11 Student Loan Interest Expense- Limited to $2,500 interest expense per year - Phase-out – S: 55-70,000 M: 115-145,000 (married, must file jointly to claim), dependent may NOT claim...
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This note was uploaded on 05/11/2010 for the course CPA 2010 taught by Professor ?? during the Spring '10 term at Becker College.
- Spring '10