CORNELL NOTES SHEET

QUESTIONS NOTES

Gross Income

minus Adjustments Deductions for AGI. Above the Line deductions

Non-Business Deductions:
1. Educator Expenses: $250 annually
2. Penalty for early withdrawal of Savings
3. Alimony – Divorces executed before 2019
4. Moving Expenses for Military only
5. Qualified Tuition & Fee deduction
6. Student Loan Interest Expenses:
a. up to $2,500, for each year interest is paid
b. Cannot be another TPs dependent

7. IRA Deduction
a. Combined limit for 2019 = lesser of
i. $6,000 ($12,000 if MFJ)
ii. Earned Income
b. Additional $1,000 allowed for 50+ age

8. Health Savings Account deduction

a. Self-only coverage, can contribute up to $3,500
b. Family coverage, can contribute up to $7,000

9. Self-Employed individuals
a. One-Half of Self Employment taxes [ 7.65% ]
b. Self-Employed Retirement plans
c. Self-Employed Health Insurance deduction.
i. can deduct 100% of medical insurance payments for spouse, self and dependents

Equals AGI
Minus the greater of
 Itemized Deductions
 Standard Deduction
ITEMIZED DEDUCTIONS
1.) Medical & Dental Expenses 4.) Charity
2.) Taxes 5.) Casualty
3.) Interest 6.) Miscellaneous
.

Medical/Dental Expenses In excess of 10% of AGI

 Limited to $10,000 for MFJ ($5,000 for Single)

Taxes  Deductible in year paid or withheld

Deductible Taxes
A. Real Estate Taxes: (State and Local only)
B. Income Taxes: (State, Local, or Foreign Income taxes)
i. Estimated taxes paid during the year. Withheld taxes from paychecks during the year.
ii. Assessments paid during Year for prior year’s tax.
C. Personal Property Taxes
i. State and Local taxes, deduction allowed only if
ii. Taxes are based on Value alone & are imposed on a yearly basis

Non-Deductible Taxes
A. Foreign Taxes on Personal or Real Property
B. Federal Taxes, including Social Security
C. Inheritance taxes for states. Federal, state or local Estate or Gift Taxes
D. Business Taxes (deducted on Sch C) & Rental Property Taxes (deducted on Sch E)
E. Self-employment taxes
Interest Deductible Interest
A. Home Mortgage Interest (interest paid is deductible on Loans up to $750,000)
i. Acquisition Indebtedness: Debt incurred in Buying, Constructing, or Substantially Improving TP Principal
or Second home.

ii. Home-Equity Indebtedness: No longer deductible

a. Debt secured by Home, but Debt is not used to Buy, Build or Improve home.

B. Investment Interest Expense (Limited to Net Investment Income)

i. Net Investment Income includes taxable interest and non-qualified dividends.

Non-Deductible Interest
A. Personal (consumer) Interest
B. Prepaid Interest (allocate over period of the loan)
i. Must be allocated over the period of the loan
C. Educational Loan Interest (adjustment, not itemized deduction)

Charitable Contributions 1.) Cash/Check  Up to 60% of AGI

Cash = 60% of AGI 2.) Property  Up to 30% of AGI

Property = 30% of AGI  For Property contributions, Deduct Lesser of:
o FMV or Adjusted Basis
 Non-business investment or LTCG property held for over 1-year
o always deduct FMV.

3.) Total Charitable Contributions = 60% of AGI

 Limited to 60% of AGI

Casualty  Applicable to property held for Personal use only (not business use)
 Must be in a Federally-Declared disaster area for casualty loss to be deductible
 10% of AGI test.
 Deductible to extent that each individual loss
o Exceeds $100 casualty floor and that
o Loss exceeds 10% of AGI

Miscellaneous  Gambling losses to extent of winnings

 AMT Formula for Computing Alternative Minimum Tax
Alternative
Minimum Regular Taxable Income
Tax / Adjustments
 Preferences
 Alternative Minimum Taxable Income
 Exemption
= Alternative Minimum Tax Base
 Tax Computation
 Tentative AMT Tax before Credits
 Tax Credits
 Tentative Minimum Tax
 Regular Income Tax
 Alternative Minimum Tax

Adjustments 1) MACRS 3-, 5-, 7-, and 10-year property, using 200% declining balance method
a) For AMT, the 150% declining-balance method is used over the MACRS life
(deductions for AMT and b) No AMT adjustments is required for property that is eligible to use Bonus Depreciation
Regular Tax differ)
2) Itemized Deductions
a)  Taxes, deduction not allowed, so must be added back to Taxable Income (TI)
b)  Standard Deduction, if used, is added back
c) No adjustment needed for below Itemized deductions b/c same rules apply for Regular Tax
i) Home Mortgage Interest on Acquisition Indebtedness only.
ii) Medical Expenses are allowed for AMT in excess of 10% of AGI.

Tax Preference Items Always add-backs

1) Private activity bond interest income (on certain bonds)
2) Percentage depletion the excess over adjusted basis of property

AMT Exemption  MFJ = $111,700

 Single = $71,700

SUMMARY: Write 4 or more sentences describing specific learning from these notes.
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________
__________________________________________________________________________________________