Chapter 6 Deductions and losses
Chapter 6 Deductions and Losses
Learning Objectives Distinguish between deductions for and from AGl Discuss the criteria for deducting business and investment List the substantiation requirements for deducting travel and entertainment expenses Explain the timing of deductions under both the cash and accrual methods
Learning Objectives • Distinguish between deductions for and from AGI • Discuss the criteria for deducting business and investment • List the substantiation requirements for deducting travel and entertainment expenses • Explain the timing of deductions under both the cash and accrual methods
Learning Objectives Explain the Tax consequences of wash sales Tax consequences of transaction between related parties Discuss the criteria for determining whether an activity is a hobby or trade or business Determine the tax consequences of vacation homes
Learning Objectives • Explain the Tax consequences of wash sales • Tax consequences of transaction between related parties • Discuss the criteria for determining whether an activity is a hobby or trade or business • Determine the tax consequences of vacation homes
For versus from agi classification For AGi Reduces aGi which affects the allowable deduction for itemized deductions Most common deductions for AGi Trade or business expenses RAS Alimony Losses on investment Interest paid by certain individuals on qualified educational loans 1/2 of self-employment tax and 60 of health insurance costs paid by self-employed individuals
For Versus From AGI Classification • For AGI – Reduces AGI which affects the allowable deduction for itemized deductions – Most common deductions for AGI • Trade or business expenses • IRAs • Alimony • Losses on investment • Interest paid by certain individuals on qualified educational loans • 1/2 of self-employment tax and 60 % of health insurance costs paid by self-employed individuals
For versus from agi classification From AGl Itemized deduction only will have tax benefit if the total deductions exceed the applicable standard deduction
For Versus From AGI Classification • From AGI – Itemized deduction only will have tax benefit if the total deductions exceed the applicable standard deduction