Topic Comments
Individual Taxation
Self Employment Tax Charged @15.30% (12.40% Social Security + 2.90% Medicare)
Social security tax charged on first $147,000
Levied if self employment income exceed $400
Net Investment Income Charged @3.80% on lower of NII or excess of AGI over AGI threshold
Tax AGI threshold is $250,000 MFJ and $200,000 Single/HOH/MFS
Levied only if AGI exceeds AGI threshold
Hospital Insurance Tax 0.90% charged on wages/self employment income above the AGI threshold limits of Net Investment Income Tax
Qualifying Child Age less than 19 or 24 if full time student
Child must not provide >50% of his/her support
Lives with taxpayer > half year
Qualifying Relative Gross Income less than $4,300 (Not include Social Security Income)
Taxpayer must provide >50% of his/her support
Multiple Support Group of people provide >50% support of the individual
Agreement Taxpayer claiming exemption must provide >10% but less than 50% support
Return Filing Income is greater than standard deduction
Requirements Self employment income is $400 or more.
Business Loss Deduction Business loss deduction is $270,000 for single and $540,000 for MFJ in 2022.
Net Operating Loss Individuals:
2021 NOL: Carryforward indefinitely but can offset only 80% of taxable income
Corporations:
Carried forward indefinitely and can be used to offset 80% of taxable income
Capital Loss Individuals:
Net Capital Loss maximum deduction is $3,000. Excess may be carried forward indefinitely.
Corporations:
Carryover to 3 years backward and 5 years forward to be deducted against capital gains during those years
Passive Activity Loss Passive activity losses can be offset against passive income only. Excess is carried forward indefinitely.
An active rental realty manager can deduct a maximum loss of $25,000 per year.
Formula is 25,000 - 50% (AGI - 100,000)
Alimony Divorce agreement 2019 or later, Alimony is not taxable and not deductible
Social Security Benefits Provisional Income = AGI before Social Security + Tax Exempt Income + 50% of Social Security Benefits
A taxpayer can deduct up to $2,500 of student loan interest per year for self, spouse & dependents (For qualified
Interest expense for AGI education expenses) as deduction for AGI
Additional Standard Single MFJ
Deduction Single / Only 1 Spouse qualifies
65 OR Blind 1700 1350
65 AND Blind 3400 2700
Both Spouses qualify
Each 65 OR Blind x 2700
Both 65 AND Blind x 5400
Medical Expenses Expenses Paid - Insurance Reimbursement - 7.5% of AGI = Dedutible Medical Expenses
Charitable Contribution Excess charitable contribution can be carried forward for 5 years. C/F contribution in following years can be deducted upto the
applicable limits of AGI (60%/30%).
Casualty Losses Lower of (Drop in FMV or Adjusted basis) - Reimbursements - $100 per event - 10% of AGI = Casualty Losses
Foreign Tax Credit Foreign tax credit limitation = US tax liability x Foreign income/Worldwide income
Excess credit can be carryback 1 year and carryforward 10 Years
Tax Credits Child tax credit is limited to $2,000 per qualifying child for children under age 17.
The credit is reduced $50 for each $1,000 (or part thereof) of excess AGI ($400,000 MFJ/$200,000 others)
Refundable to the extent of 15% of the taxpayer's earned income in excess of $2,500 limited to $1,500
AOTC Up to $2,500 “per student” - 100% of first $2,000, 25% of next $2,000. For first 4 years of college.
40% refundable credit (i.e., 40% of $2,500 = up to $1,000 is refundable).
Lifetime learning credit-
Up to $2,000 “per taxpayer” - 20% of first $10,000 paid on behalf of all family members together
Dependent care credit
Credit is 35% - 20% of qualifying expenses depending on AGI. Credit will not go below 20% in any case.
$3,000 (one dependent) or $6,000 (multiple dependents).
Credit is reduced by one percentage point for each $2,000 (or portion thereof) that AGI exceeds $15,000.
Family Tax Credit- $500 credit is allowed for dependents who are not qualifying children.
Kiddie Tax Child's Unearned Income - $2,200 = Net Unearned income (Taxable to parents at their tax rate)
Child's Income (Earned/Unearned) - Std Deduction (Higher of $1,100 or Earned Income + $350) - Net Unearned Income = Taxable Earned
Income (Taxable to child)
Retirements Plan Contribution to Traditional/Roth IRA is limited to $6,000 single / $12,000 MFJ (2022) or compensation received, whichever is lower.
Additional $1,000 is allowed for taxpayers over the age of 50.
IRA contributions must be made by the original due date of the return, April 15, to be deductible for the previous tax year.
Penalty tax of 10% is levied if any amount is withdrawn before the age of 59½.
Installment Sale Amount received in the year x (Gross Profit / Total Contract Price)
Home Office Expenses Either allocate expenses between the portion of the dwelling used as residence and the office or use simplified method
$5 per sq footage maximum 300 sq footage. Limited to business income.
Property Taxation
Asset received as gift If gift tax is paid by the donor on the property gifted then the basis of the asset will be increased by following-
Gift tax paid x (Appreciation in property/FMV of Property)
Personal residence sale Gain is excluded upto $250,000 or $500,000 but loss is not allowed as it is a personal asset. Used for atleast 2 years of 5 years.
Inoluntary Conversion Gain excluded if property replaced with 4 years in connection with a declared federal disaster
Depreciation 5 Years - Computers, office equipment, automobiles, light trucks, Appliances/ furniture used in rental real estate
7 Years - Office Furniture & Fixtures, Machinery & Equipment
15 Years - Improvements made to land
27.5 Years - Residential Realty
39 Years - Non- Residential Realty (Commercial Property)
Section 179- Maximum amount can be deducted is $1,080,000 for purchases upto $2,700,000
Mid quarter convention applies if >40% of personal assets purchased in last quarter.
Amortization Research & Development - 60 Months
Patent & Copyrights - Over useful life
Organization and Start-up Expenses - $5000 in first year and balance 180 months
Other Intangible Asssets - 180 Months
Section 1231
The lookback provision states that the net Section 1231 gains must be offset by net Section 1231 losses from the five preceding tax
years that have not previously been recaptured. To the extent of these losses, the net Section 1231 gain is treated as ordinary income.
Section 1244 Stock Gains are long term and losses are ordinary subject to below limits
Maximum losses allowed are $100,000 for married filing jointly and $50,000 for others
C Corp Taxation
Qualified Service Corp Corporations where at least 95% of shares are owned by qualified shareholders including employees
Accounting Method C-Corporations with average annual gross receipts <= $26 Million for last three year can use cash basis accounting method
Uniform Capitalization Unicap Rules apply if gross receipts exceed $26 MM in the last three years
Expenses Bonuses and Vacation Pay can be deducted only if paid within two and half months of year-end
Compensation for CEO, CFO can be deducted up to a maximum of $1 Million per executive.
Net business interest expense deduction is limited to the sum of:
Business Interest Income + 30% of adjusted taxable income for the year
Disallowed business interest expense is carried forward indefinitely
Casualty Losses Lesser of decline in FMV or adjusted basis - Insurance proceeds received
The “$100 floor” and “10% of AGI” limitations do not apply for corporations
Charitable Contributions Limited to 10% of Adjusted Taxable Income (ATI)
Dividend Received Ownership less than 20% DRD 50%
Deduction Ownership 20% to less than 80% DRD 65%
Ownership 80% or more DRD 100%
Accumulated Earnings Tax Accumulated Earnings Credit is higher of -
($250,000 - Beginning Accumulated Earnings) or reasonable business needs
($150,000 - Beginning Accumulated Earnings) for Personal Service Corporations
Accumulated Earnings Tax rate is 20%
Personal Holding 5 or less individuals directly or indirectly own more than 50% stock and
Company Tax 60% or more income is from passive sources
Undistributed income is taxed @ 20%
S Corp Taxation
Eligibility 100% shareholders should opt for S Corp status
Decision must be made by 3/15 of the tax year
Business Loss Shareholder can be deduct the loss upto at risk amount which is net basis + direct loan by the shareholder
Termination More than 50% of shareholder's must file for S-Corp Termination or
For 3 Consecutive Years, More than 25% of Income is from Passive Sources and AEP exists for all these three years
Built In Gains Tax FMV > Basis as at time of S-Corp Election
Sold within 5 years of S-Corp Election
21% Tax Rate
Late Filing Penalty Monthly penalty equal to $200 times the number of persons who were shareholders during any part of the tax year, for each month or
part of the month
Partnership Taxation
Business Loss Partner can deduct loss upto at risk amount and excess is carried forward indefinitely
At risk amount = Basis - Share of Non-Recourse Liabilities
Built In Gains Tax FMV > Basis as at time of S-Corp Election
Sold within 7 years of contribution
Gain is allocated to the contributing partner
