Chapter 14 Special Tax Computation Methods. Tax credits,, and Payment of Tax
Chapter 14 Special Tax Computation Methods, Tax Credits, and Payment of Tax
Learning Objectives Calculate the alternative minimum Tax Describe what constitutes self employment income and compute the self employment tax Describe the various business and personal tax credits Understand the mechanics of the federal withholding tax system and the requirements for making estimated payments
Learning Objectives • Calculate the Alternative Minimum Tax • Describe what constitutes selfemployment income and compute the selfemployment tax • Describe the various business and personal tax credits • Understand the mechanics of the federal withholding tax system and the requirements for making estimated payments
Alternative Minimum Tax COMPUTATIONALASPECTS TAXABLE INCOME PLUS+: TAX PREFERENCE ITEMS PLUS PERSONAL AND DEPENDENCY EXEMPTION PLUS+ OR MINUS: ADJUSTMENTS REQUIRED EQUALS =: ALTERNATIVE MINIMUM TAXABLE INCOME MINUS EXEMPTION AMOUNT ($45,000 MFJ&ss,$33, 750 single, &$22, 500 MFS) EQUALS = ALTERNATIVE TAX BASE TIMES X: TAX RATE (26%of first $175,000; 28%amounts in excess of $175,000) EQUALS = TENTATIVE MINIMUM TAX MINUS: REGULAR TAX EQUALS =: THE ALTERNATIVE MINIMUM TAX
Alternative Minimum Tax COMPUTATIONAL ASPECTS TAXABLE INCOME PLUS+: TAX PREFERENCE ITEMS PLUS+: PERSONAL AND DEPENDENCY EXEMPTION PLUS+ OR MINUS: ADJUSTMENTS REQUIRED EQUALS =: ALTERNATIVE MINIMUM TAXABLE INCOME MINUS: EXEMPTION AMOUNT ($45,000 MFJ & SS, $33,750 single, & $22,500 MFS) EQUALS =: ALTERNATIVE TAX BASE TIMES x: TAX RATE (26% of first $175,000; 28% amounts in excess of $175,000) EQUALS =: TENTATIVE MINIMUM TAX MINUS: REGULAR TAX EQUALS =: THE ALTERNATIVE MINIMUM TAX
Alternative Minimum Tax Tax preference items Include excess depreciation over sIL depreciation Tax-exempt interest on certain activity bonds Exclusion of gain on the sale of certain small business stock under sec. 1202
Alternative Minimum Tax • Tax preference items – Include excess depreciation over S\L depreciation – Tax-exempt interest on certain activity bonds – Exclusion of gain on the sale of certain small business stock under Sec. 1202
Alternative Minimum Tax AMT adjustments For most taxpayer AMTI adjustments represent itemized deductions that are not allowed in com puting AMTI Only certain itemized deductions allowed for AMt purposes Casualty and theft loss in excess of 10% of AGi Charitable contributions Medical expenses in excess of 10% ofAG Qualified housing interest
Alternative Minimum Tax • AMT adjustments – For most taxpayer AMTI adjustments represent itemized deductions that are not allowed in computing AMTI – Only certain itemized deductions allowed for AMT purposes • Casualty and theft loss in excess of 10% of AGI • Charitable contributions • Medical expenses in excess of 10% of AGI • Qualified housing interest