ACCT-405 Exam 3 Vocab

Tuition and Fees Deductions

$4,000, you can claim or spouse or dependant

Roth IRA

-Contributions after taxes -grows tax-free, -if IRS requirements are met distributions are received tax-free

Coverdell ESA's

-Contributions are not deductible -can grow tax free until distributed -$2,000 per year per beneficiary till they are 18 -any schooling, -can be tranferred to new beneficiary, must be used before 30

Lifetime Learning Credit

-For tuition, required fees, books, and supplies/equipment -$2,000 per family -nonrefundable, unlimited years

American Opportunity Tax Credit

-Tax credit for qualified education expenses paid for each eligible student -$2,500, 40% refundable -4 years only -tax form 1098T

SEP

-Type of profit sharing plan -simplified employee pension

MAGI

AGI+ several givebacks of items that were excluded from tax

What income is required to contribute to an IRA

Earned Income

Donative Intent

has to have the warm and fuzzy feeling to it, can't have the intention of getting something back from the donation

The Saver's Tax Credit

offsets the cost of saving for retirement and incentivizes low and moderate income clients to save for retirement

Child Tax Credit

-credit for each qualifying child under 17, -phase out of $50 per $1,000 over threshold

Traditional before-tax IRA

-deductible contributions -grow tax-free -distributions are taxed as ordinary income

State Sponsered 529 Plan

-each state invests in its own mutual funds -grow tax free -some states let you use any states mutual funds -states will tax you if you do not use theirs

Traditional after-tax IRA

-nondeductible contributions -grow tax-free -distributions that are not a recovery of basis are taxed as ordinary income

Child and dependant care credit

-nonrefundable -under 13 or special needs dependant or spouse -depends on AGI

Adoption Tax Credit

-nonrefundable, -$15,950 with phase out, -eligible for under 18 or special needs adults

Points

1% of mortgage payment = 1 point, prepaid interest

flexable spending accounts

Can put money into several different pre-tax benefits

Interest

Compensation for the use of money

Home Equity Interest

Deductible, mortgage interest used for any other purpose than to acquire, build, or substantially improve the client's primary residence or designated second residence

Medical Expense

Expenditures for the betterment of health

Fees

Not deductible, gives the person a personal benefit

Contributions to HSA

Single: $3,850 Family: $7,750 $1,000 catch-up if individual is over 55

Profit Sharing

a defined-contribution plan

Qualified Residence Interest

deductible, interest paid on up to $1 million dollar mortgage to purchase or build a home (Code Section 163)

Top-hat plan

given to highly paid executives

Spousal IRA

if contributions do not exceed the earned income for the family, both spouses can have an IRA

457 Plan

non qualified plans for government employees

Rollovers

transfer tax deferred (back end tax breaks)

interest free loan analogy

use the money that would have been lost in tax savings to save for retirement

Health Savings Account Strategy

use them as a retirement accumulation device

Student Loan Interest Deduction

-Allowed for paying interest on a student loan used for higher education -$2,500

Prepaid Tuition 529 Plan

-By semester or by credit -schools are in groups that you can buy from

Associated With Test

1.) Clear business purpose for having the expense 2.) Conduct substantial business before, during, or after the meal

Triple Tax Advantages for HSA

1.) Contributions on a before tax basis 2.) investment earnings are tax free 3.) Qualified distributions are received tax free

Taxes that are Not Deductible

1.) Federal Income taxes 2.) SS Taxes 3.) Estate Taxes 4.) Local assessments for curbing or sidewalks 5.) local assessments for trash removal

Requirements to contribute to HSA

1.) Individual must be covered under a HDHP 2.) Not allowed to have any other health coverage 3.) Not allowed to be in medicare

Taxes that are Deductible

1.) SALT 2.) Real estate (property taxes) 3.) Personal property taxes imposed on an annual basis

Directly Related Test

1.) main purpose of entertainment was to conduct business 2.) Engaged in business during the entertainment period 3.) more than a general expectation of getting income or future benefit

defined-benefit formula

2% X YOS X FAS

Solo k

For people who want substantial savings from schedule c income

HELCOs

Home Equity Line of Credit, frequently used by clients

403(b)

available if your a public school or 501(c), similar to 401(k),

Defined Benefit

formula that defines the benefit, monthly pension check

Code Section 501(c)

gifts of cash or property to a not-for-profit organization that is registered with the IRS

SERP

given to the wealthiest people in company

Uniforms

if they are adaptible to street use, they are not deductible

Deferral of tax on earnings

interest of plan assets, tax deferred (middle tax breaks)

Taxes

legislative authority for the public good and not payment for a special privilege

Before-tax contributions

money put in plan is tax deferred (front end tax breaks)

50% Cutback Rule

only 1/2 of meal expenses will be deductible (except for transportation)

Refundable Credits

paid even if the amount of the credit exceeds the tax owed

nonrefundable credits

paid only to the extent of tax owed; they are not paid if they exceed the taxpayers liability

401(k) contributions

salary deferrals (elective), employer usually matches, ROTH is after tax

How are Scholarships and Fellowships Taxed

tax free if meet 6 requirements