Income & Assets

Regardless of what is outlined in the divorce decree, alimony payments cease to be considered "alimony" after the death of the receiving spouse. Any payments made after death (by the estate) will not be considered alimony for federal tax purposes. Topic: 26-27EA Part 1-Section 2- Income and Assets

Partnership income, including tax-exempt interest, increases a partner’s basis in his partnership interest. The other items listed would do the opposite; they would decrease a partner's basis in his partnership interest. For more information on partnership basis, see Publication 541, Partnerships. Topic: 26-27EA Part 2-Section 1-Business Entities and Considerations

In order to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, the taxpayer must: Have foreign earned income. government employees do not qualify for the foreign earned income exclusion. Correct Answer Explanation for D: Shane must be physically present for 330 full days during a period of 12 consecutive months to meet the physical presence test for the foreign earned income exclusion. Topic: 26-27EA Part 1-Section 2- Income and Assets Cor

A taxpayer can deduct mortgage interest on a main home and a second home as an itemized deduction. A home can be a house, cooperative apartment, condominium, mobile home, house trailer, or houseboat that has sleeping, cooking, and toilet facilities. Homeowner dues are not deductible. Topic: 26-27EA Part 1 -Section 3-Deductions and Credits

The Kiddie Tax comes into effect when a child has unearned income above $2,700 in 2025. For 2025, the first $1,350 of a child's unearned income qualifies for the standard deduction, the next $1,350 is taxed at the child's income tax rate, and unearned income above $2,700 is taxed at the parent's marginal income tax rate. Topic: 26-27EA Part 1 -Section 4-Taxation

The net investment income tax applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts. It does not apply to partnerships or corporations, but it can apply to individual partners and shareholders on their individual tax returns. Topic: 26-27EA Part 2-Section 1-Business Entities and Considerations

The Credit for Other Dependents, also called the Other Dependent Credit (ODC) is a credit that may reduce a taxpayer\'s tax liability by as much as $500 for each eligible dependent. This credit is nonrefundable. Topic: 26-27EA Part 1 -Section 3-Deductions and Credits

The taxpayer does not need to be a full-time student in order to claim the student loan interest deduction. A taxpayer may deduct up to $2,500 of the interest paid on a qualified student loan. This deduction phases out as income rises above a specified amount based on filing status. To qualify, the taxpayer must have a legal obligation to make interest payments on the loan, which must have been used for higher education expenses. The education must have been for the taxpayer, a spouse, or a depe

Although expenses related to a hobby activity are not deductible, one benefit is that hobby income is not subject to self-employment tax, unlike other types of business income. Topic: 26-27EA Part 1-Section 2- Income and Assets

A social security number is usually required to obtain a PTIN, unless the preparer is a foreign person with a permanent non-U.S. address, and can provide documentation to support that status. Note: A foreign preparer who does not have a social security number and is neither a citizen of the U.S. nor a resident alien of the U.S. will need to complete the Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Form 8946, PTIN Supplemental Application For Foreign Persons Witho

A taxpayer can deduct mortgage interest on a main home and a second home as an itemized deduction. A home can be a house, cooperative apartment, condominium, mobile home, house trailer, or houseboat that has sleeping, cooking, and toilet facilities. Homeowner dues are not deductible. Topic: 26-27EA Part 1 -Section 3-Deductions and Credits

The maximum deduction for student loan interest is $2,500 per tax return, per year. This is the maximum deduction, regardless of filing status, so the limit is the same for unmarried taxpayers as well as MFJ filers. The deduction is claimed as an adjustment to income. Topic: 26-27EA Part 1-Section 2- Income and Assets

The basis of property received as a gift is generally the donor's adjusted basis just before making the gift. This is known as a "transferred basis." Topic: 26-27EA Part 1-Section 2- Income and Assets

The basis of property received as a gift is generally the donor's adjusted basis just before making the gift. This is known as a "transferred basis." Topic: 26-27EA Part 1-Section 2- Income and Assets

The basis of property received as a gift is generally the donor's adjusted basis just before making the gift. This is known as a "transferred basis." Topic: 26-27EA Part 1-Section 2- Income and Assets

Employers of farm employees do not usually file Form 941. Agricultural employers generally file Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees, instead. Most employers who have employees are required to file a Form 941 on a quarterly basis to report wages paid and payroll taxes withheld. However, special rules apply to some employers. Seasonal employers do not have to file a Form 941 for quarters in which they have no tax liability because they have paid no wages. Empl

The basis of property received as a gift is generally the donor's adjusted basis just before making the gift. This is known as a "transferred basis." Topic: 26-27EA Part 1-Section 2- Income and Assets

With regards to the QBI deduction, UBIA is tangible property subject to depreciation that is held and used in the production of QBI by a business. UBIA can include assets like business machinery, office buildings, and livestock for farmers. In most cases, UBIA is the original purchase price of the asset. UBIA does not include inventory or land (because land and inventory are never depreciated). For more information about UBIA, see the IRS detail page on the Qualified Business Income (QBI) deduc

The cost of defending or perfecting a title increases an asset’s basis. Each of the other answers decreases an asset’s basis. Topic: 26-27EA Part 1-Section 2- Income and Assets

The term "boot" refers to non-like-kind property received in an exchange, and does not qualify for like-kind treatment. Usually, boot is in the form of cash, but can also include property. Topic: 26-27EA Part 1-Section 2- Income and Assets

Only real property held in a trade or business or for investment qualifies for like-kind exchange treatment; including land, buildings, and certain unsevered natural products of land (such as natural mineral deposits, mines, and wells). Topic: 26-27EA Part 1-Section 2- Income and Assets

Form 6252, Installment Sale Income, must be completed for each year of the installment agreement. See IRS Publication 537, Installment Sales, for examples and more information. Topic: 26-27EA Part 1-Section 2- Income and Assets

Form 6252, Installment Sale Income, must be completed for each year of the installment agreement. See IRS Publication 537, Installment Sales, for examples and more information. Topic: 26-27EA Part 1-Section 2- Income and Assets

The Tax Cuts and Jobs Act expanded the definition of section 179 property to allow the taxpayer to elect to include the following improvements made to nonresidential real property: Qualified improvement property, (which means non-structural improvements to a building’s interior). Roofs, HVAC, fire protection systems, alarm systems, and security systems. Section 179 property does not include “intangible” property, such as trademarks, copyrights, or franchise rights (although there is an exceptio

The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. The personal representative also must perform the following duties: Apply for an employer identification number (EIN) for the estate. File all tax returns, including income, estate, and gift tax returns, when due. Pay the tax determined up to the date of discharge from duties. An executor is NOT responsible fo

The adjusted basis is the basis at the date of conversion plus any improvements that were made while the property was a rental, minus any depreciation. 414 Rental Income and Expenses. This $25,000 allowance is only allowed for rental activities. See Publication 527, Residential Rental Property, for more information and to see similar examples. Learn more about the special rules for rental losses in Publication 925, Passive Activity and At-Risk Rules. Per IRS Publication 502, taxpayers can deduct

A self-employed individual must calculate and pay self-employment tax by filing Schedule SE, Self-Employment Tax, with their Form 1040. Topic: 26-27EA Part 2-Section 1-Business Entities and Considerations

Topic: 26-27EA Part 1-Section 2- Income and Assets 559 Net Investment Income Tax. To see more information about the 199A QBI deduction, see the IRS page for the Qualified Business Income Deduction. Certain types of income are excluded from the QBI deduction under Section 199A. Correct Answer Explanation for D: Unless specifically prohibited by the IRC or income tax regulations, a company can choose to compute its taxable income under any of the listed methods. To learn more about the EITC, see t

Dimitri can deduct alimony paid even if he does not itemize deductions. He must file Form 1040 and enter the amount of alimony paid as an adjustment to income. Note: Under the TCJA, an individual whose divorce was finalized in 2019 or later will no longer be able to deduct alimony payments. However, any divorce decree that was finalized before 2019 (so, 2018 or earlier) is considered “grandfathered” which means that those alimony payments remain deductible to the payor and taxable to the payee.

To find out if a taxpayer's Social Security benefits may be taxable, all of the items listed above are taken into account EXCEPT the exclusion for foreign earned income. In order to calculate the taxable portion of Social Security, you must take one half of your Social Security benefits and add that amount to all your other income, including tax-exempt interest. This number is known as your combined income, and it is compared to the base amounts. If the resulting calculation is less than $25,000

IRD is included in the decedent’s estate and may be subject to estate tax. Income in respect of a decedent (IRD) is any taxable income that was earned but not received by the decedent by the time of death. IRD is not taxed on the final return of the deceased taxpayer. IRD is reported on the tax return of the person (or entity) that receives the income. This could be the estate, in which case, it would be reported on Form 1041. Otherwise, it could be the surviving spouse or another beneficiary, s

A social security number is usually required to obtain a PTIN, unless the preparer is a foreign person with a permanent non-U.S. address, and can provide documentation to support that status. Note: A foreign preparer who does not have a social security number and is neither a citizen of the U.S. nor a resident alien of the U.S. will need to complete the Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Form 8946, PTIN Supplemental Application For Foreign Persons Witho

A social security number is usually required to obtain a PTIN, unless the preparer is a foreign person with a permanent non-U.S. address, and can provide documentation to support that status. Note: A foreign preparer who does not have a social security number and is neither a citizen of the U.S. nor a resident alien of the U.S. will need to complete the Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Form 8946, PTIN Supplemental Application For Foreign Persons Witho

The value of employer-provided life insurance coverage over $50,000 is taxable to the employee, meaning it will be included in the employee's taxable wages. Group life insurance coverage under $50,000 is not taxable to the employee and can be offered as a tax-free fringe benefit. Topic: 26-27EA Part 1-Section 2- Income and Assets

Nontaxable combat pay is an exception to the general rule that income excluded from tax is not considered earned income for the EITC. Taxpayers can choose to include nontaxable combat pay in their earned income if it gives them a better tax result. Topic: 26-27EA Part 1 -Section 3-Deductions and Credits

Up to 85% of Social Security benefits may be taxable. No taxpayer pays taxes on more than 85% of their benefits, regardless of their income. Topic: 26-27EA Part 1-Section 2- Income and Assets

In 2025, the limit on investment income is increased to $11,950. This limit is now indexed for inflation. Basic Qualifying Rules for 2025 To qualify for the EITC, the taxpayer must: Have worked and earned income Have investment income below $11,950 in the tax year 2025 Have a valid Social Security number by the due date of the return (including extensions) Be a U.S. citizen or a U.S. resident alien all year Not file Form 2555 (related to foreign earned income) To learn more about the EITC, see t

The maximum deduction for student loan interest is $2,500 per tax return, per year. This is the maximum deduction, regardless of filing status, so the limit is the same for unmarried taxpayers as well as MFJ filers. The deduction is claimed as an adjustment to income. Topic: 26-27EA Part 1-Section 2- Income and Assets

A social security number is usually required to obtain a PTIN, unless the preparer is a foreign person with a permanent non-U.S. address, and can provide documentation to support that status. Note: A foreign preparer who does not have a social security number and is neither a citizen of the U.S. nor a resident alien of the U.S. will need to complete the Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Form 8946, PTIN Supplemental Application For Foreign Persons Witho

A social security number is usually required to obtain a PTIN, unless the preparer is a foreign person with a permanent non-U.S. address, and can provide documentation to support that status. Note: A foreign preparer who does not have a social security number and is neither a citizen of the U.S. nor a resident alien of the U.S. will need to complete the Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Form 8946, PTIN Supplemental Application For Foreign Persons Witho

The value of employer-provided life insurance coverage over $50,000 is taxable to the employee, meaning it will be included in the employee's taxable wages. Group life insurance coverage under $50,000 is not taxable to the employee and can be offered as a tax-free fringe benefit. Topic: 26-27EA Part 1-Section 2- Income and Assets

In 2025, the limit on investment income is increased to $11,950. This limit is now indexed for inflation. Basic Qualifying Rules for 2025 To qualify for the EITC, the taxpayer must: Have worked and earned income Have investment income below $11,950 in the tax year 2025 Have a valid Social Security number by the due date of the return (including extensions) Be a U.S. citizen or a U.S. resident alien all year Not file Form 2555 (related to foreign earned income) To learn more about the EITC, see t