Chapter 1

Individual Taxation
Gross Income
Wages
Interest
Dividends
State Tax Refunds (if taken as deduction in PY)
Alimony Received
Business Income
Capital Gain/Loss
IRA Income (withdrawal)
Pension and Annuity
Rental Income/Loss
K-1 Income/Loss (Business Income, Partnership, S Corp)
Unemployment Compensation
Social Security Benefits
Other Income (gambling)
Less Adjustments (Deduction to arrive at AGI)
Educator Expenses
IRA
Student Loan Interest Expenses
Tuition & Fee Deduction
Health Saving Account
Moving Expenses
One Half Self Employment FICA
Self Employment Health Insurance
Self Employment Retirement
Interest Withdrawal Penalty
Alimony paid
= Adjusted Gross Income
Less: Itemized Deduction OR Standard Deduction (EZ form)
Medical (in excess of 10% of AGI)
Taxes State/Local (Income/Sales & Property)
Interest Expense (Home & Investment)
Charity (up to 50% of AGI)
Casualty/Theft (in excess of 10% of AGI)
Miscellaneous (in excess of 2% of AGI)
Other Miscellaneous
Less: Exemptions
$ 4050 x Taxpayer , Spouse, Dependent
=Taxable Income

Filing Status
Who must file
Income => personal exemption + Std Deduction + additional Std
ded for 65 yrs or blind
Exception Self employment income >= 400 Or Individual who can
be claimed as dependents on another tax payers return Unearned
income $1050 and earned Income $6300 or total exceeding $1000
and $5950 + $350
When to file - Apr 15
Extension Automatic extension Oct 15. Payment of Tax must be
Apr 15
Filing Status
1. Single (incl legally separated)
Dec 31
decides
2. Joint even if the spouse dies in current year Dec 31
decides
3. Qualifying Widow (Surviving spouse) with Dependent
Child
1st year Joint return, 2nd and 3rd year Qualifying widow status
(if not remarried)
Principal residence for Dependent Child Whole Year
4. Head of Household (single, divorsed or married but living
separately)
Maintains principal residence for HALF the year for
a. Dependent Son/Daughter (including adopted/step) custodial
parent
b. Father or Mother pays upkeep WHOLE year. Not required to
live with taxpayer (nursing home)
c. Dependent Relatives must live with tax payers. No cousins,
foster parents
Child or descendent
Parents
Relatives

Dependent
Y
Y
Y

Lives with Tax payer

Y
N
Y

PERSONAL EXCEMPTION - $ 4050

1.
Dependents on another tax payer cant claim on its return
2.
Married Taxpayer Each receives an exemption. If spouse
has no gross Income and not claim dependent of another
tax payer
3.
Birth or death during year can claim full exemption

4.

Phase out of personal exemption 2% per every $2500

a. Joint/Surviving spouse - $ 309900
b. Head of Household $284050
c. Single $258250
d. Married filing separately - $154950
e.g. Joint earning $321900 therefore 321900 309900 = 12000 /
2500 =4.8 or 5
5 x 2% = 10%. Exemption = 100 10% = on 90% income
DEPENDENCY EXEMPTION (for Personal Exemption)
QUALIFYING CHILD - CARES
Close Relative kids including brother sister
Age Limit - <19 years or 24 in case of full time student (>5
months in college) . For permanently disable no age limit
Residency and Filing requirement - > half year principal place.
No joint return unless to claim refund
Eliminate Gross Income Test No test on income
Support Test changes Child do not contribute more than half
of his own support
QUALIFYING RELATIVE
Support Tax payer support >50% for a person. For multiple
support, a qualifying relative, living entire year, may agree which
contribute (more than 10%) may claim the dependency exemption
Under Exemption Amount of Taxable Income Dependent
income < 4000. Tax free income is not counted in Gross Income e.g.
Social Security (low income), Tax exempt Interest(State/Municipal),
Tax exempt Scholarship
Precludes Dependent Filing a joint return No married
dependent exemption, unless filed solely for refund of tax paid, or
withheld for tax (is Zero)
Only Citizen of US or resident of US, Canada, Mexico
Relative All including Foster parent and cousins who llive for
the entire year.
OR
Tax payer lives with Individual (if Non Relative) for Whole Year
as dependent