AAMS Module 5 Exam with Questions and Answers

AAMS Module 5 Exam with Questions and Answers Items that reduce total income to arrive at adjusted gross income ANSWER IRA contributions, Self employed health insurance, Keogh contributions, Qualified job related moving expenses for military, Alimony paid for divorce prior to 2019, Penalties for early withdrawal of savings Itemized Deductions ANSWER generally personal in nature like property taxes, mortgage interest, medical expenses, charitable contributions, and investment interest Alternative Minimum Tax (AMT) - 26 or 28% rate ANSWER imposed on individuals who use varioius deductions, exemptions, and tax sheltering mechanisms as a way to make them pay a minimum amount of tax. Kiddie Tax ANSWER Limits the standard deduction for kids under 18 or 24 if they are full time students Income Shifting ANSWER Transfer of income producing assets to another taxable entity (usually another individual in a lower income tax bracket) Marginal Income Tax Rate ANSWER tax rate levied on your last dollar of taxable income Average Income Tax Rate ANSWER the average tax rate you pay on total income (always less than the marginal rate) Accrual Income ANSWER recognized when earned, not necessarily when received (that's cash income) Basis of property acquired by inheritance ANSWER the fair market value on the date of death. Could also be determined by FMV on alternate valuation date