MGMT 504: Individual Tax 1
MGMT 504: Individual Tax 1 MGMT 504
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This 3 page Class Notes was uploaded by Emily McIlhattan on Thursday January 29, 2015. The Class Notes belongs to MGMT 504 at Purdue University taught by Jason Stanfield in Winter2015. Since its upload, it has received 168 views. For similar materials see Tax Accounting in Accounting at Purdue University.
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Date Created: 01/29/15
MGMT 504 Slide Deck 3 Last Lecture Outline Tax Legislation Tax Concepts Tax Administration Current Lecture Outline II III IV V End of Last Lecture Legislative GraceCapital Recovery Individual taxes Taxes and Rates Deductions for AGI Deductions from AGI Current Lecture Legislative GraceCapital Recovery i LG Congress has to pass the tax law so when anything is not taxable exclusion credit or deduction it is a gift from Congress you are not entitles to any deductions or any excuse form paying taxes b Capital Recovery sacred you can deduct cost of good sold even applies to drug dealers The Individual Income Tax I a Taxation of individuals all about vertical equity very complicated because there is very little capital recovery going on i Relatively simple for accounting rules though cash basis and calendar year b First part includes ALL income all realized economic gains no capital recovery and borrowed money c Taxable Income Gross Income Allowable deductions i Deductions For AGI Adjusted Gross Income ii Deductions From AGI Memorize Individual Income Tax Income broadly conceived Less Exclusions Municipal Bond interst Gross Income Less deductions for AGI ADGI Less the greater of wmeom VI VII i Total itemized deductions ii Or standard deduction g Taxable income h Tax on Taxable income i Less Tax credits remember these are from tax not the base taxable income j Tax due or refund T xes and Rates total tax liability is calculated either from the Tax Tables or the Tax Rate Schedule a Tax on income in all prior brackets tax on income in current bracket marginal tax rate Deductions for AGI everyone can take it a AGI is the line it is a measure of someone s ability to pay i EX 1 Business expenses 2 Capital Leases 3 Student Loan interest 4 Alimony Pay money you pay to a spouse once you re divorced AGI a Limitations on deductibility of some expenses and eligibility for other tax bene ts are based on it an estimate of a person s nancial position Deductions From AGI a Personal unreimbursed business expenses itemized b You are not required to take them only if they are greater than standard deduction available standard deduction is set by law i EX 1 Medical Expenses 2 State and local income taxes 3 Charitable contributions c Standard Deduction i 1 basic deduction BSD depends on the ling status of the taxpayer single married ling joint married ling separate head of household it goes up every year 1 Married Filing Jointly two married people elect to le jointly better than separate a Surviving spouse Qualifying Widow or Widower 2 Married Filing Seperately not advantageous would only do if you Have to estranged lots of limitations harsher rate schedule not lots of legislative grace 3 Single taxpayers who are not legally married on the last day of the year and do not qualify as head of the household 4 Head of Household unmarried legally unmarried or an abandoned spouse at the end of the tax year and provide over 50 of the cost of the home a Abandoned Spouse compliance is bad allows married people to be a head of household tend to skew lower income ii Additional Standard Deduction not part of the exemption adjust for inability 65 and legally blind special deducUons