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taxation - CCH Essentials of Federal Income Taxation...

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Chapter 1 Overview of the Tax Structure CCH Essentials of Federal Income Taxation ©2009 CCH. All Rights Reserved. 4025 West Peterson Ave. Chicago, IL 60646-6085 www.CCHGroup.com
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CCH Essentials of Federal Income Taxation 2 of 32 Taxable Income Formula Income from all sources Exempt income = Gross income Deductions = Taxable income Chapter 1
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CCH Essentials of Federal Income Taxation 3 of 32 Expanded Tax Formula for Individuals Income from all sources Exempt income = Gross income – Deductions for AGI (adjusted gross income) = AGI – Deductions from AGI Greater of: Itemized deductions or standard deduction + Total personal and dependency exemptions = Taxable income × Tax rate = Tax liability before additional taxes and tax credits + Additions to tax – Tax credits = Final tax due (refund) Chapter 1
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CCH Essentials of Federal Income Taxation 4 of 32 Gross Income Gross Income Compensation for services, including fees, commissions, taxable fringe benefits, etc. Gross income from business Gains from property transactions Interest Rents Royalties Dividends Alimony and separate maintenance payments Annuities Pensions Income from forgiven debt Distributive share of partnership income and gain Pro rata share of S corporation income and gain Income in respect of a decedent Income from an interest in an estate or trust The Code lists the following as sources of gross income sources (and implies that sources of gross income exist): Chapter 1
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CCH Essentials of Federal Income Taxation 5 of 32 Deductions for AGI Deductions for AGI Trade and business deductions Losses from property transactions involving business and investment property Partner’s distributive share of partnership loss Shareholder’s pro rata share of S corporation loss Deductions related to rental and royalty income Contributions to qualified retirement plans of self-employed individuals Contributions to traditional IRAs Penalty for early withdrawal from certificates of deposits Alimony and separation maintenance payments Chapter 1
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CCH Essentials of Federal Income Taxation 6 of 32 Deductions for AGI (continued) Deductions for AGI (continued) Qualified moving expenses One-half self-employment tax 100% of health insurance premiums paid by a self-employed person Contributions made to medical or health savings accounts Interest paid on student loans Certain expenses of reservists, performing artists, and fee- based government officials Educator’s expense Tuition and fees deduction Deduction for domestic production activities Chapter 1
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CCH Essentials of Federal Income Taxation 7 of 32 Deductions from AGI Deductions from AGI Medical Taxes Interest Contributions Casualty and theft losses Job expenses and some miscellaneous deductions Other miscellaneous deductions Chapter 1
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CCH Essentials of Federal Income Taxation 8 of 32 Standard Deduction Standard Deduction
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