Understanding Tax Deductions and AGI for College Students

Chapter 6 - SmartBook Taxpayers have a choice of deducting the standard deduction or their itemized deductions. Therefore, ______ AGI deductions are considered to be beneficial to more taxpayers because: for; they are available to all eligible taxpayers, not just those that itemize deductions. Which of the following characteristics are required for a business expense to be deductible? (Check all that apply.) Directly related to business activity Ordinary Necessary Expenses associated with generating rental or royalty income are deductible ______ AGI.(Enter only one word per blank.) For Entities such as partnerships, LLCs, and S corporations are known as ______-‎______ entities because their income is reported on the owners' tax returns. Any expenses or losses from these entities are typically deductible ______ AGI. floworpass through for Horatio and Maria are married and have three children. Horatio is self-‎employed and pays health insurance premiums for himself and his family. Which of the following situations would disqualify part or all of the premium costs from being deductible for AGI? Maria has an employer-‎sponsored health insurance plan available at work, but they do not participate. Which of the following statements are CORRECT when comparingFor AGIdeductions toFrom AGIdeductions? (Choose all that apply.) Certainfrom AGIdeductions may not have an effect on taxable income despite the taxpayer incurring the expense. Deductionfor AGIreduce AGI thus reducing the limitations on other tax benefits that are decreased or phased out for higher income taxpayers. The intent of the termsordinary and necessarywhen referring to deductible business expenses means the expenses must be ______. appropriate and helpful for generating a profit Which of the following statements is correct regarding the deductibility of self-‎employment tax for self-‎employed taxpayers? Self-‎employed taxpayers can deduct the employer portion of the self-‎employment tax they pay for AGI. The income and deductions that result from rental property and royalties are reported on: Schedule E Form 1040 Llona invested $100,000 in an 18-‎month certificate of deposit. She needed to cash in the CD to meet some unexpected expenses. Llona earned $2,000 in interest income from the CD, but she only received $1,800 because the amount was reduced by a $200 penalty for early withdrawal. How will these amounts be treated for tax purposes? Llona will report the $2,000 as gross income and deduct the $200 for AGI. Edward is a partner in ENS, Ltd. The partnership generated a loss during the current year. Edward's share of the loss was $7,000. How should Edward handle the loss for tax purposes assuming there are no basis, at-‎risk, or passive loss limitations? Edward can deduct $7,000 for AGI.