👨👩👧💰 Who's Yours & What's Theirs?
If two taxpayers can claim the same child, these IRS rules determine who is entitled to the dependency.
What are the tie-breaker rules?
This is the difference between the amount realized from a sale and the adjusted basis of the property.
What is a gain or loss?
This type of interest income is generally excluded from federal gross income.
What is municipal bond interest?
Taxpayers generally choose whichever deduction provides the greater tax benefit: the standard deduction or this.
What are itemized deductions?
This type of tax is withheld from most employees' paychecks to help fund retirement and disability benefits.
What is Social Security tax?
Unlike deductions, these reduce a taxpayer's tax liability dollar for dollar.
What are tax credits?
Choosing direct deposit when filing electronically is generally the fastest way to receive this.
What is a tax refund?
Income earned after a taxpayer's death generally belongs to this taxable entity.
What is the estate?
A qualifying child must meet this test to show they did not provide more than half of their own support.
What is the support test?
A taxpayer sells an investment they owned for 14 months. The gain is generally classified as this.
What is a long-term capital gain?
Unlike itemized deductions, adjustments to income may be claimed even if a taxpayer chooses this deduction.
What is the standard deduction?
Homeowners commonly itemize this expense paid to a lender during the year.
What is qualified home mortgage interest?
This payroll tax helps fund Medicare health insurance.
What is Medicare tax?
This popular credit is designed to help taxpayers with qualifying children.
What is the Child Tax Credit?
Before submitting a return, taxpayers should carefully verify this identifying number for everyone listed on the return.
What is a Social Security Number (or Taxpayer Identification Number)?
Property inherited from a decedent generally receives this type of basis adjustment.
What is a step-up (or step-down) in basis to fair market value?
A taxpayer's 27-year-old daughter who is permanently disabled and meets all other tests may still qualify as this type of dependent.
What is a qualifying child?
A taxpayer sells their personal vehicle for $5,000 less than they paid for it. This loss is generally treated this way.
What is a nondeductible personal loss?
Qualified contributions to this retirement account may reduce a taxpayer's income.
What is a traditional IRA?
This category of taxes may qualify as an itemized deduction, subject to annual limitations.
What are state and local taxes (SALT)?
Employees and employers generally each pay this percentage of Social Security tax on wages up to the annual wage base.
What is 6.2%?
This credit is available to many low- and moderate-income workers who meet certain requirements.
What is the Earned Income Tax Credit (EITC)?
A taxpayer receives an extension but pays none of the tax due by the original filing deadline. The extension prevents this penalty but not another.
What is the failure-to-file penalty?
A surviving spouse may be eligible to use this filing status for up to two years after the year of a spouse's death if all requirements are met.
What is Qualifying Surviving Spouse?
A qualifying child who is permanently and totally disabled is not subject to this test.
What is the age test?
The holding period for most capital assets begins on this day.
What is the day after the asset is acquired?
This adjustment allows eligible taxpayers to deduct interest paid on qualified education loans.
What is the student loan interest deduction?
Medical expenses are deductible only to the extent they exceed this percentage of Adjusted Gross Income.
What is 7.5% of AGI?
Self-employed individuals generally pay both the employer and employee portions of these payroll taxes.
What are Self-Employment (SE) taxes?
A taxpayer may qualify for this retirement-related credit by making eligible contributions and meeting income limits.
What is the Retirement Savings Contributions Credit (Saver's Credit)?
A taxpayer should keep copies of their return and supporting documents for this practical reason.
What is to substantiate the information if the IRS has questions or an amended return is needed?
Interest earned on a deceased taxpayer's bank account after the date of death is generally reported by this taxpayer.
Who is the estate?
A taxpayer receives both taxable wages and tax-exempt municipal bond interest. Which of these amounts is included in gross income?
What are the wages only?
A taxpayer's adjusted basis in an asset generally increases because of this.
What are capital improvements?
One-half of this tax is deductible as an adjustment to income.
What is self-employment tax?
A taxpayer has deductible medical expenses, mortgage interest, charitable contributions, and state taxes. Before deciding to itemize, they should compare the total of these deductions to this amount.
What is the standard deduction?
This additional Medicare tax may apply to higher-income taxpayers once their wages exceed certain thresholds.
What is the Additional Medicare Tax?
This credit may help offset the cost of caring for a qualifying individual while the taxpayer works or looks for work.
What is the Child and Dependent Care Credit?
A taxpayer mails their return on the due date, and the IRS receives it three days later. The return is generally considered timely because of this rule.
What is the timely mailing is timely filing rule?
A surviving spouse remarries before the end of the tax year in which their spouse died. Their filing status for that year is determined based on this event.
What is their marital status on December 31?
A taxpayer receives a cash gift from their grandmother for their birthday. For federal income tax purposes, the recipient generally treats this payment as this.
What is nontaxable income?
Property held primarily for sale to customers in the ordinary course of business is generally not considered this type of property.
What is a capital asset?
A taxpayer contributes to a Health Savings Account (HSA). If eligible, these contributions are generally treated as this.
What is an adjustment to income?
This limitation caps the deduction for state and local taxes on Schedule A.
What is the SALT deduction limit?
Unlike Social Security tax, this payroll tax has no annual wage base limit.
What is Medicare tax?
This education credit may be claimed for undergraduate, graduate, or job-skill courses.
What is the Lifetime Learning Credit (LLC)?
A taxpayer files a joint return and later discovers their spouse failed to report income. Under the general rule, both spouses remain responsible because of this concept.
What is joint and several liability?
A taxpayer dies before receiving interest that had already accrued on a certificate of deposit. That interest is generally classified as this type of income.
What is Income in Respect of a Decedent (IRD)?
A college student, age 22, is a full-time student, lives with her parents during school breaks, earns $18,000 from a part-time job, but does not provide more than half of her own support. She is generally considered this type of dependent.
What is a qualifying child?
A taxpayer sells stock for a gain after holding it for six months. They use part of the proceeds to purchase different stock the following week. Does the new purchase affect the taxability of the original gain?
What is no? The gain is still recognized because the wash sale rule applies only to certain losses, not gains.
An employee receives reimbursement for business travel under an accountable plan. These reimbursements are generally treated this way.
What are excluded from income?
A taxpayer makes a contribution to a qualified charity and receives a valuable concert ticket in return. The deductible amount is generally limited to this.
What is the amount of the contribution that exceeds the value of the benefit received?
A taxpayer receives both wages and self-employment income during the year. Both sources of income are considered when determining whether this additional payroll tax applies.
What is the Additional Medicare Tax?
Two taxpayers have identical income and qualifying children. One owes $3,000 in tax before credits, while the other owes $500. Which taxpayer generally receives the greater benefit from a nonrefundable credit?
Who is the taxpayer with the $3,000 tax liability?
A taxpayer files an extension but forgets to sign the completed return before mailing it. The IRS may treat the return as this.
What is not properly filed (or invalid until signed)?
A taxpayer dies owning rental property that continues to generate rental income after death. That rental income is generally reported by this taxpayer.
Who is the estate?
A taxpayer receives a state income tax refund. Whether the refund is taxable this year depends primarily on this.
What is whether the taxpayer received a tax benefit from deducting the state income taxes in the prior year?
A taxpayer inherited investment property and sold it three months later. For tax purposes, the gain or loss is generally treated as this type.
What is a long-term capital gain or loss?
A taxpayer receives a $20,000 gift from a parent, earns $5,000 of municipal bond interest, and contributes to a traditional IRA. Which of these items reduces Adjusted Gross Income?
What is the traditional IRA contribution?
(The gift and municipal bond interest are excluded from gross income—they don't reduce AGI because they were never included in it.)
A taxpayer pays medical expenses for themselves, their spouse, and their adult child who qualifies as their dependent. These expenses may all be included when determining this deduction.
What is the medical expense deduction?
A taxpayer has excess Social Security tax withheld because they worked for multiple employers during the year. They generally recover the excess by claiming it in this way.
What is a credit on their federal income tax return?
What is the biggest difference between a refundable credit and a nonrefundable credit?
What is a refundable credit can generate a refund even if no tax is owed, while a nonrefundable credit can only reduce tax liability to zero?
Why is electronically filing with direct deposit generally recommended over mailing a paper return with a paper refund check?
What is because it is faster, more secure, and reduces processing errors?
A taxpayer dies in October. Their personal representative discovers the taxpayer never filed the prior year's required tax return. In addition to the final return, the representative is generally responsible for filing this.
What is any delinquent (unfiled) tax return required for prior years?