Fundamentals of Taxation

Tuition,fees,books,supplies,room,board,and other necessary expenses of attendance are qualified education expenses for purposes of the student loan interest deduction.

For 2016,the amount of the student loan interest deduction is limited to $3,500.

The student loan interest deduction may be limited based on the modified AGI of the taxpayer.

For the interest on a student loan to qualify for the student loan interest deduction,the student must be enrolled full-time.

A Health Savings Account HSA)is a tax-exempt savings account to be used for qualified medical expenses.

To be eligible to fund a Health Savings Account HSA),a taxpayer must be self-employed,or an employee or spouse)of an employer who maintains a high deductible health plan,or an employee of a company that offers no health coverage and the employee has purchased a high deductible health plan on his or her own.

Distributions from Health Savings Accounts HSAs)are subject to tax,if they are used to pay for qualified medical expenses.

For 2016,unreimbursed qualifying moving expenses are an itemized deduction.

Deductible moving expenses may include moving household goods and personal effects from the old residence to the new residence.

There is an employment test,a distance test,and a time test that must be met in order to deduct qualifying moving expenses.

For the moving expense distance test,the new job location must be at least 100 miles farther from the taxpayer's old residence than was the old job location.

Self-employment tax is calculated on the gross earnings of the business.

Self-employed persons are allowed a for AGI deduction equal to one-half of the self-employment tax imposed.

Qualified self-employed taxpayers can deduct,as a for AGI deduction,80% of health insurance payments for 2016.

The self-employed health insurance deduction is also available to a partner in a partnership and to a shareholder in a Subchapter S corporation who owns more than 2% of the stock in the corporation.

If a taxpayer incurs an early withdrawal of savings penalty,the taxpayer is entitled to report the penalty as a for AGI deduction on Form 1040.

The payment of alimony has tax ramifications.These tax ramifications only affect the payor of the alimony.

Under a divorce agreement executed in 2016,periodic payments of either cash or property must be made at regular intervals to be deductible as alimony.

In lieu of making cash payments of alimony directly to a former spouse,payments to a third party on behalf of the former spouse can qualify as alimony.

Roberto files his tax return as married filing separately.He has not lived with his wife for over three years.In the current year,by order of the court,he paid her $500 per month for 12 months as separate maintenance.He will be able to deduct $6,000 as alimony for the year.