AAMS Module 5WITH COMPLETE SOLUTIONS GRADED
A+.
Terms in this set (53)
Gross Income Income from all sources unless specifically excluded by tax law
1/6
, Life insurance proceeds received by reason of death of the insured, muni bond
Examples of income exclusions interest, gift/inheritance, workers comp, child support, most scholarships received,
and many employee fringe benefits
Reduce total income dollar for dollar. Examples: deductible IRA contributions,
Keogh contributions for the unincorparted business owner, qualified education
Deductions for AGI/Above the line
interest, alimony paid, self employed health insurance deductions, qualified job
deductions
related moving expenses, tuition and fees deduction, one half of the self
employment tax, and the penalty on early withdwal of savings
Technically, income from all sources, unless specifically excluded. Examples include
wages, commissions, tips, honorariums, interest, dividends, net business income,
Gross Income
rents, royalties, alimony received, unemployment compensation, gambling income,
and partnership income
The amount reported about three-fourths of the way down the front of the form
1040. Total income may be thought of as the gross income reduced by all exclusions.
Total Income Other items that are included in calculating total income are items that reduce the
income. Some of these items may include losses from sole proprietorships or up to
$3,000 of net capital losses
Adjusted Gross Income The amount remaining after subtracting adjustments to income
Adjusted gross income reduced by personal and dependency exemptions and
Taxable Income
further reduced by the greater of the standard deduction or itemized deductions
Items that reduce total income to arrive at adjusted gross income. Examples include
deductible IRA contributions, self employed health insurance deduction, Keogh
Adjustments to income contributions, qualified job related moving expenses, alimony paid, and penalties on
early withdrawal of savings. Often referred to as above the line deductions or
deductions for AGI
Items of income that represent an economic benefit but are not included as income:
includes life insurance proceeds received, a gift or inheritance received, workers
Exclusions
compensation benefits, child support received, municipal bond interest, and many
employee fringe benefits
An amount subtracted from adjusted gross income to arrive at taxable income;
Personal Exemption generally a taxpayer may take a personal exemption for himself or herself, a spouse
and dependents
Tax Credit a dollar for dollar offset against the tax liability
These are deductions for expenses that are generally personal in nature. Examples
include deductions for property taxes and mortgage interest on a residence,
Itemized Deductions medical expenses exceeding 10% of AGI, charitable contributions and investment
interest expenses. These often are referred to as below the line deductions or
deductions from AGI
Refers to an allowance granted to most individuals in lieu of itemizing deductions. A
Standard Deduction taxpayer has the option of using the greater of total itemized deductions or the
standard deduction
The AMT is a tax imposed on individuals who use various deductions, exemptions,
and tax sheltering mechanisms as a way of making those individuals pay a minimum
amount of tax. Certain tax preference or adjustment items, such as tax exempt
What is the Alternative Minimum Tax
interest on qualified private activity municipal bonds, depletion allowances and
intangible drilling costs from oil and gas activities, are adjustments to taxable
income. The alternative minimum taxable income is taxed at either a 26% or 28% rate
2/6
A+.
Terms in this set (53)
Gross Income Income from all sources unless specifically excluded by tax law
1/6
, Life insurance proceeds received by reason of death of the insured, muni bond
Examples of income exclusions interest, gift/inheritance, workers comp, child support, most scholarships received,
and many employee fringe benefits
Reduce total income dollar for dollar. Examples: deductible IRA contributions,
Keogh contributions for the unincorparted business owner, qualified education
Deductions for AGI/Above the line
interest, alimony paid, self employed health insurance deductions, qualified job
deductions
related moving expenses, tuition and fees deduction, one half of the self
employment tax, and the penalty on early withdwal of savings
Technically, income from all sources, unless specifically excluded. Examples include
wages, commissions, tips, honorariums, interest, dividends, net business income,
Gross Income
rents, royalties, alimony received, unemployment compensation, gambling income,
and partnership income
The amount reported about three-fourths of the way down the front of the form
1040. Total income may be thought of as the gross income reduced by all exclusions.
Total Income Other items that are included in calculating total income are items that reduce the
income. Some of these items may include losses from sole proprietorships or up to
$3,000 of net capital losses
Adjusted Gross Income The amount remaining after subtracting adjustments to income
Adjusted gross income reduced by personal and dependency exemptions and
Taxable Income
further reduced by the greater of the standard deduction or itemized deductions
Items that reduce total income to arrive at adjusted gross income. Examples include
deductible IRA contributions, self employed health insurance deduction, Keogh
Adjustments to income contributions, qualified job related moving expenses, alimony paid, and penalties on
early withdrawal of savings. Often referred to as above the line deductions or
deductions for AGI
Items of income that represent an economic benefit but are not included as income:
includes life insurance proceeds received, a gift or inheritance received, workers
Exclusions
compensation benefits, child support received, municipal bond interest, and many
employee fringe benefits
An amount subtracted from adjusted gross income to arrive at taxable income;
Personal Exemption generally a taxpayer may take a personal exemption for himself or herself, a spouse
and dependents
Tax Credit a dollar for dollar offset against the tax liability
These are deductions for expenses that are generally personal in nature. Examples
include deductions for property taxes and mortgage interest on a residence,
Itemized Deductions medical expenses exceeding 10% of AGI, charitable contributions and investment
interest expenses. These often are referred to as below the line deductions or
deductions from AGI
Refers to an allowance granted to most individuals in lieu of itemizing deductions. A
Standard Deduction taxpayer has the option of using the greater of total itemized deductions or the
standard deduction
The AMT is a tax imposed on individuals who use various deductions, exemptions,
and tax sheltering mechanisms as a way of making those individuals pay a minimum
amount of tax. Certain tax preference or adjustment items, such as tax exempt
What is the Alternative Minimum Tax
interest on qualified private activity municipal bonds, depletion allowances and
intangible drilling costs from oil and gas activities, are adjustments to taxable
income. The alternative minimum taxable income is taxed at either a 26% or 28% rate
2/6
