Quiz 4: Adjustments for Adjusted Gross Income

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.

Eligible educators can deduct up to $250 of qualified educational expenses as an above-the-line deduction.

An eligible educator for the educator expense deduction must work at least 600 hours during the school year.

Expenses for home schooling or for non-athletic supplies for health or physical education courses qualify for the education expense deduction.

For 2016,taxpayers can take an above-the-line deduction for qualified tuition and related expenses paid during the year for the taxpayer,taxpayer's spouse,or a dependent.

Books purchased for courses at the campus bookstore,independent of tuition charges,are eligible expenses for the tuition and fees deduction.

For 2016,the maximum amount of deductible student loan interest is $2,500.

Qualifying moving expenses are treated as an itemized deduction for 2016.

The deduction for self-employment taxes in 2016 is deductible as an above-the-line deduction at a rate of 7.65% based on the employer's portion of the taxes.

The cost of self-employed health insurance premiums is deductible above the line at a rate of 80% of the cost.

If a divorce agreement executed in 2016 specifies that a portion of the amount of an alimony payment is contingent upon the status of a child,that portion is considered to be a child support payment.

Student loan interest is deductible only by the person who actually attended the educational institution.

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

Unreimbursed qualifying moving expenses are an above-the-line deduction for 2016.

To qualify for the moving expense deduction,an employee must change job sites,move a required distance,and change employers.

For self-employed taxpayers,3/4 of the amount of self-employment taxes are deductible as an above-the-line deduction.

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.

If a divorce agreement executed in 2016 specifies that a portion of the amount of an alimony payment is contingent upon the age or status of a child,that portion is considered to be a child support payment.

Madison is a teacher at a parochial elementary school.If she spends $600 on art supplies for her classes,$250 of this amount can be claimed as a deduction for AGI.

The educator expense deduction is available to community college and university professors.

The qualified tuition and fees deduction is $4,000 for all eligible taxpayers.

Sam is a freshman in the UC-Davis degree program in veterinary medicine.In 2016,Sam paid $3,000 in tuition,$500 for books,and $250 for supplies for class.Sam also paid room and board of $3,500.What is the total qualifying education expense for the student loan interest deduction for Sam in 2016? A)$3,000. B)$3,750. C)$7,250. D)$3,500.

Henry graduated from the University of Maryland in 2014.In 2016,to take advantage of lower interest rates,he refinanced his qualified education loans with another qualified student loan.He is not a dependent on another person's tax return.Before AGI limits,what is the maximum deduction available to him for the $3,200 he paid for educational student loan interest in 2016? A)$2,000. B)$3,000. C)$0. D)$2,500.

In 2012 through 2015,Samantha borrowed a total of $30,000 for higher education expenses on qualified education loans.In 2016,while still living at home and being claimed by her parents as a dependent,she began making payments on the loan.The first year interest on the loan was reported as $1,750.The amount that Samantha can claim on her tax return is: A)$0. B)$2,500. C)$1,750. D)$1,500.

Charde,who is single,had a student loan for qualified education expenses on which interest was due.For 2016,the total interest payments were $2,000.Assuming she has AGI under $65,000,how much may she deduct in arriving at adjusted gross income for 2016? A)$2,000. B)$2,500. C)$1,700. D)$0.

In 2015,Carlos,who is single,received his Bachelor's degree and started working.In 2016,he began paying interest on qualified education loans and had modified AGI of $70,000.He paid interest of $1,200 in 2016.Which of the following statements is correct? A)Due to the phase-out rules,only a portion of the $1,200 will be deductible. B)Taxpayers are not allowed a deduction for education loan interest in 2016. C)The full $1,200 is deductible in arriving at adjusted gross income. D)If his modified AGI had been $75,000,the phase-out rules would have reduced his deductible interest to zero.

For a taxpayer to be eligible to fund a Health Savings Account HSA),he or she must be: A)An employee of a company that offers no health coverage and the employee has purchased a high deductible health plan on their own. B)A self-employed individual. C)An employee or spouse)who works for an employer with a high deductible health plan. D)All of these.

If an employer contributes to an employee's HSA,the payment will: A)be deductible by the employee. B)not be counted as income to the employee. C)not be allowed as a contribution on behalf of the employee. D)none of these.

Taxpayers who contribute to or withdraw from an HSA during the year must: A)do nothing. B)report it on Schedule A. C)file a Form 8889 and attach it to their Form 1040. D)attach a written note to their tax return.

At the beginning of 2016,Chantel was permanently transferred from her office in New York City to New Jersey.Her office in NYC was 15 miles from her old NY home.For Chantel to meet the distance test for qualifying moving expense deductions,how many miles must the office in New Jersey be from her old home? A)50. B)40. C)35. D)65.

Which of the following is not deductible as a moving expense? A)The cost of a pre-move house hunting trip. B)Travel expenses during the move. C)Lodging for household members during the move. D)The cost of moving household goods.

Peter,having moved from Oregon to Florida in the current year,met all the requirements to deduct moving expenses.Which of the following expenses that he incurred is not deductible as qualified moving expenses? A)Shipping costs for his classic Corvette. B)Temporary storage costs incurred while his furniture was in transit from Oregon to Florida. C)The cost of an oil change incurred in driving his other car from Oregon to Florida. D)Home improvements to sell his home in Oregon.

For a taxpayer to be eligible to deduct moving expenses,in addition to the employment test,he or she: A)Must meet either the time or distance test. B)Must meet the distance test. C)Must meet the time test. D)Must meet both the time and distance test.

Rena had the following moving expenses during 2016: Rena moved to start a new job and met all the required tests for moving expense deductibility.What is the total amount of moving expenses that can be deducted on her 2016 return? A)$2,275. B)$1,675. C)$2,100. D)$600.

For the deduction of self-employment taxes,which of the following statements is correct? A)They are 80% deductible as a for AGI deduction. B)They are not deductible. C)They are taken as an itemized deduction on Schedule A. D)They are 50% deductible as a for AGI deduction.

The determination for the deduction of the self-employment tax is based upon the: A)gross earnings of the business. B)total of 7.65% of FICA taxes. C)net earnings of the business. D)total of itemized deductions.

The percentage of self-employed health insurance premiums that could be deductible as a for AGI deduction is: A)100%. B)80%. C)50%. D)70%.

Shanika is a self-employed hair stylist and had net earnings from self-employment of $4,100.She paid $375 per month for health insurance over the last year.Shanika is entitled to a for AGI deduction for health insurance premiums of: A)$0. B)$4,100. C)$375. D)$4,500.

An early withdrawal penalty is reported on Form: A)1099-DIV. B)1098. C)W-2. D)1099-INT.

The early withdrawal penalty is deductible as an: A)above-the-line deduction for AGI. B)itemized deduction on Schedule A. C)adjustment on Schedule B. D)none of these.

Under a court-ordered decree of separate maintenance executed in 2016,Rebecca is required to pay her ex-husband,Carl,$4,750 a month until their youngest son turns age 18.At that time,the required payments are reduced to $2,100 per month.How much of each payment is deductible by Rebecca as alimony for 2016? A)$4,750. B)$2,100. C)$0. D)$6,850.

All of the following are requirements for a payment to be considered alimony except, A)Payments are not required after the death of the recipient spouse. B)Payments are required by a divorce or separation agreement. C)Payments cannot be a transfer of services. D)Payments can either be in cash or property.

Under a 2016 divorce decree,Antoine is required pay $800 of alimony and $400 of child support each month for the next 10 years.In addition,Antoine makes a voluntary payment of $200 per month.How much of the total monthly payments are deductible by Antoine? A)$400. B)$800. C)$1,000. D)$200.

Which of the following items are considered alimony? A)Payments made on a piece of property transferred to the ex-spouse under the settlement agreement. B)Noncash property settlement. C)Payments made to a third party on behalf of the former spouse for the former spouse's dental expenses. D)Payments made for a six month period after the death of the recipient spouse.

Maria files her tax return married filing separately.She has not lived with her husband for over two years.Beginning in January 2016,by court ordered decree,she is to pay her husband $600 per month as separate maintenance.For 2016 how much will she be able to deduct as alimony? A)$3,600. B)$0. C)$600. D)$7,200.

The goal of the alimony recapture rules is to properly define the substance of payments made to a former spouse in order to ensure proper tax treatment.These rules "lookback" to the following years for the calculation: A)Years 3 and 4. B)Years 4 through 6. C)Years 1 and 2. D)Years 1 through 3.

The educator's expense deduction is taken: A)On the educator's expense form. B)Above the line on the Form 1040. C)On Form 2106. D)On Schedule C.

Qualification under the 900-hour working test for the educator's expense deduction is measured by: A)3 consecutive months. B)5 consecutive months. C)The calendar year. D)The academic year.

An eligible educator,in the K through 12 educational system,for purposes of the educator's expense deduction is: A)A principal. B)A counselor. C)A teacher. D)All of these.

In order to be eligible for the qualified tuition and related expense deduction,a qualifying student must be enrolled: A)At least three quarter time. B)Full-time. C)For at least one course. D)At least half time.

The deduction for qualified tuition and related expenses includes: A)Insurance and medical expenses. B)Room and board. C)Transportation and other personal living expenses. D)Only tuition and related expenses.

The maximum amount of the deduction for student loan interest for an eligible taxpayer is limited in the 2016 tax year to: A)$2,500. B)$2,350. C)$2,000. D)$1,500.

A qualified education loan is one incurred by the taxpayer solely to pay qualified education expenses incurred on behalf of the: A)taxpayer's spouse. B)a dependent of the taxpayer. C)taxpayer. D)all of these.

In order to open a Health Savings Plan HSA)account,a taxpayer must qualify under which category: A)An employee or spouse)who works for an employer with a high deductible health plan. B)Any one of these. C)A self-employed individual. D)An uninsured employee of a company that does not offer health coverage,who purchases high-deductible health coverage on his or her own.

For family coverage in 2016,the maximum deductible and out of pocket expense to a Health Savings Account is: A)$13,100. B)$2,600. C)$12,900. D)None of these.

Which of the following is deductible as a moving expense? A)The cost of a pre-move house hunting trip. B)The cost of moving household goods. C)Meal costs incurred during the move. D)All of these are deductible as moving expenses.

In order to meet the distance test criteria for qualifying moving expenses,the new job location must be: A)at least 50 miles farther than the new residence from the old job location. B)at least 50 miles farther than the old residence was from the old job location. C)100 miles from the old residence. D)100 miles from the old job location.

In order to meet the time test for qualifying moving expenses,a taxpayer must: A)Remain employed only in the initial new job for the entire 39 or 78 week period. B)Be a full-time employee for a period of 39 weeks during the 12 months following arrival in the new area. C)Be a full-time employee for a period of 39 weeks during the 12 months following arrival in the new area or be a self-employed individual for at least 78 weeks during the 24 months immediately following arrival in the new area.At least 39 of the 78 weeks must be during the first 12-month period. D)Be a self-employed individual for at least 78 weeks during the 24 months immediately following arrival in the new area.At least 39 of the 78 weeks must be during the first 12-month period.

Which of the following types of income is subject to the self-employment tax? A)Gain on the sale of a home. B)W-2 income. C)Income from a sole proprietor's coffee shop. D)Interest earned on a bank account.

The self-employment tax is calculated on: A)Schedule D. B)Schedule C. C)Form SE. D)Form 1040.

The amount of self-employed health insurance premiums that could be deductible as a for AGI deduction is: A)100%. B)50%. C)80%. D)70%.

Sade,who is single and self-employed as a graphic artist,had net earnings from self-employment of $7,250 for the year.She paid $285 a month for health insurance premiums over the last year.Sade is entitled to a for AGI deduction for health insurance of: A)$3,420. B)$3,830. C)$285. D)$0.

If a taxpayer withdraws his or her deposit on a CD before the instrument matures,the penalty for the early withdrawal on interest will be reported by the financial institution: A)In Box 2 of Form 1099-INT. B)On Form EWIP. C)In a letter of notification. D)None of these.

Which of the following is not a deductible alimony payment? A)Half of the mortgage payment on a home jointly owned with the ex-spouse when required by the decree of divorce. B)Payments for life insurance premiums required by the divorce decree. C)Payments for child support required by the divorce decree. D)Payments for dental expenses of the ex-spouse under terms of the divorce agreement.

Elena is required under a divorce agreement effective January 1,2016 to pay $800 of alimony and $250 of child support per month for 10 years.Elena also makes a voluntary payment of $150 per month.How much of each monthly payment can Elena deduct as alimony in 2016? A)$800. B)$950. C)$1050. D)$0.

The Oroscos were granted a decree of divorce effective January 1,2016.In accordance with the decree,César Orosco is to pay his wife $24,000 a year until their only child,Ricardo now 11,turns 18,and then the payments will decrease by $11,000 per year.For 2016,how much can César deduct as alimony? A)$35,000. B)$11,000. C)$13,000. D)None of these.

For 2016,taxpayers are eligible to take a student loan interest deduction of up to: A)$3,000. B)$2,500. C)$2,800. D)$2,150.

In 2012 through 2016,Shannon borrowed a total of $35,000 for higher education expenses on qualified education loans while supporting herself with a full-time job.In 2016,she had modified adjusted gross income of $50,000.The first year interest on the loan was $850.The amount that Shannon can claim on her tax return is: A)$0. B)$850. C)$425. D)$640.

Qualified education expenses for the purpose of deductible student loan interest include expenses for: A)Room and board. B)Books. C)Tuition and fees. D)All of these.

For 2016,the maximum deductible and annual out-of-pocket expenses for family coverage on a high deductible health plan for a Health Savings Account is: A)$12,900. B)$6,550. C)$13,100. D)$2,600.

Employer contributions to fund an eligible Health Savings Account HSA)on behalf of an employee,are treated by the employee as: A)Only deductible if they are a dollar-for-dollar match to employee contributions. B)Always deductible. C)Only deductible if they are less than the employee contributions. D)Never deductible.

Which of the following is not deductible as a moving expense? A)Transportation expenses during the move. B)Lodging for household members during the move. C)The cost of moving household goods. D)Pre-move house hunting expenses.

Due to a company consolidation,Renaldo transfers from Boston to San Diego.Under a new job description,he is reclassified from department manager to a staff member.His moving expenses,which are not reimbursed,are as follows: Renaldo's deductible moving expense is: A)$8,400. B)$5,600. C)$1,900. D)$4,400.

Which of the following expenses does not qualify as a moving expense? A)Transportation of household goods. B)House hunting expenses. C)Travel expenses. D)Lodging.

The for AGI deduction for the self-employment tax is based upon: A)a total of 7.65% of the employer's share of FICA taxes. B)filing status. C)a total of 15.3% of FICA taxes. D)the gross earnings of the business.

As a for AGI deduction,the expense for self-employed health insurance premiums: A)Can be limited by both the amount of net earnings of the business and can be limited by the availability of other health insurance coverage. B)Can be limited by the amount of net earnings of the business. C)Can be limited by the availability of other health insurance coverage. D)Is never limited.

What percentage of medical insurance premium payments could be deductible by self-employed taxpayers as a deduction for adjusted gross income on their 2016 tax returns? A)0%. B)50%. C)100%. D)75%.

Jena is a self-employed fitness trainer who had net earnings from self-employment of $23,500.She paid $525 per month for health insurance over the entire last year.Jena is entitled to a for AGI deduction for health insurance of: A)$0. B)$6,300. C)$6,500. D)$5,250.

Which of the following is not a requirement for an alimony deduction? A)The payee must have a dependent child. B)The payments must be in cash. C)The payments must cease upon the death of the payee. D)The payer and payee must not live in the same household at the time of the payments.

Rick and Lenora were granted a divorce in 2015.In accordance with the decree,Rick made the following payments to Lenora in 2016: Child support payments contingent on the age of the child $ 4,000 Annual cash payments other than child support $ 6,000 How much should Lenora include in her 2016 taxable income as alimony? A)$0. B)$4,000. C)$10,000. D)$6,000.

Under the terms of a divorce agreement,Bev was to pay her husband Leon $4,000 per month in alimony and $1,500 per month in child support.For a twelve-month period,what is the amount that Bev can deduct from gross income and Leon must include in gross income? A)$48,000. B)$66,000. C)$18,000. D)$0.

Mike and Karen were divorced.Their only marital property was a personal residence with a fair market value of $1.5 million and a cost of $575,000.Under the terms of the divorce agreement,Mike would receive the house and Mike would pay Karen $125,000 each year for 5 years,or until Karen's death,whichever should occur first.Mike and Karen were not living together when the payments were made by Mike.Mike paid the $625,000 to Karen over the five-year period.Mike's recognized gain from the transfer of the house to him is: A)$575,000. B)$925,000. C)$0. D)$1,500,000.

What is an "eligible educational institution" as it relates to the deductibility of student loan interest?

What is the key limitation related to income associated with deductibility of student loan interest?

Delores,who is single,received her degree in 2016,and took a job earning $62,500 per year.In 2016,she was required to begin making payments on her qualified education loans.In 2016 she paid $1,350 in interest on those loans.How much can she claim as an educational loan interest deduction for the year?

What is a Health Savings Account HSA)?

What are the contribution amounts for both individual and family coverage to a Health Savings Account for a tax payer under 55 years of age for 2016?

In order to qualify for a moving expense deduction,taxpayers must meet three tests.What are they?

Are any moving expenses deductible other than those incurred directly for the taxpayer? If so,what are the requirements for deductibility?

In 2016,Miguel accepted a new job and moved from San Diego to Boston to begin work.He incurred moving expenses for his household goods and furniture of $3,500.Prior to moving,Miguel flew to Boston to look for a new residence.The transportation and lodging for this trip to Boston was $900 and his meals were $150.The cost of his travel during the actual move to Boston was $500 which included $75 for meals.Calculate the amount of Miguel's moving expense deduction for 2016.

What is the amount of self-employment tax that self-employed individuals must pay and what is the proper treatment on their tax return?

What are the two limitations associated with the deduction for health insurance for self-employed individuals?

Is the self-employed health insurance deduction available to individuals other than self-employed taxpayers? If so,to whom is it available?

What is meant by a penalty on early withdrawal of savings and under what circumstances is it deductible?

Define each of the following: alimony,child support,and a property settlement.

Why is it important to distinguish between a property settlement and alimony?

Renee and Thomas obtained a divorce effective May 1,2016.In accordance with the divorce decree,Thomas was required to pay Renee alimony of $2,500 per month payments were to stop only in the event of her death or remarriage).Furthermore,he was to transfer title of their house which had a cost of $150,000 and a fair value of $200,000 on the date of transfer,and was to continue making the monthly mortgage payments of $1,500. a)Determine the amount of Thomas's alimony deduction in 2016. b)Determine the amount of Renee's alimony income in 2016. c)Assume that Thomas was required to pay off the remaining mortgage balance in the event Renee died.Does Thomas's alimony deduction in 2016 change? Why or why not?