Week Seven Paper Work Ac555

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PAPER WORK WEEK SEVEN (AC553) Solution: (A) ADJUSTED GROSS INCOME: This is a measure of income and it used to establish eligibility for financial benefits. It is calculated as gross income from taxable sources minus allowable deductions. Adjusted gross income is important to individual income taxation because it controls individual qualification for numerous deductions and credits. Besides, it can affect individual eligibility for retirement plans. (B) How does ADJUSTED GROSS INCOME AFFECT: (1) Medical Deduction on Form 1040, Schedule A Only the part of medical expenses that exceed 7.5% of the amount on Form 1040, line 38 is deductible. To the extent you were not reimbursed, you can deduct the amount you paid for:…show more content…
A federal tax deduction of up to $25,000 that is available to non-real estate professionals who own at least a 10% interest in a rental property that they actively manage and that operates at a loss during a particular tax year. (5) The Child Tax Credit: T he amount of the credit is $1000 per child. A qualifying child is a U.S. citizen or resident who is the taxpayer’s child, adopted child, eligible foster child, stepchild, sibling, step-sibling or descendent of any of these who is less than 17years old as of the close of the calendar year in which the tax year of the taxpayer begin. (6) The Investment Credit: The investment credit is claimed on Form 3468, Investment Credit. This is a credit against your federal income tax. Currently, it's made up of three components: the rehabilitation credit, the energy credit, and the reforestation credit. The investment tax credit is itself one of the components of the general business credit and is subject to limitations, carry-back and carry-forward rules, etc. that apply to all the other components of that credit. Such as: 1)10% for non- residential buildings placed in service and 20% for residential and non-residential certified historical structures. The basis reduction in investment credit would be equal to 100 percent of the

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