©2015, College for Financial Planning, all rights reserved.

Session 2Itemized Deductions and Personal Exemptions

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMIncome Tax Planning

Session Details

Module 1

Chapter(s)

1 and 2

LOs 1-6 Analyze a situation to calculate taxable income.

2-2

Income Tax Terms

2-3

Income Tax Terms

2-4

Steps in the Calculation Process

2-5

Steps in the Calculation Process

2-6

Tax Computation

2-7

Itemized Deductions• Medical expenses (after 7.5% or 10% floor)• State & local income taxes (or sales tax

through 2014)• Home mortgage interest (including MIP

through 2014)• Property taxes• Investment interest expense: Module 6• Charitable contributions: Module 7• Casualty & theft losses: Module 4• Miscellaneous deductions• Tier II miscellaneous itemized deductions• Phaseout based on AGI

2-8

Qualified Mortgage Interest

• Acquisition indebtedness• Home equity indebtedness• Treatment of points

o on acquisitiono on refinance

• MIP (through 2014)

2-9

Miscellaneous Itemized Deductions

Miscellaneous Itemized Deductions (not subject to 2% of AGI floor)•Impairment-related work expensesof a handicapped individual•Unrecovered basis in commercial annuity•Gambling losses (to extent of gambling winnings)

2-10

Tier II Itemized Deductions

Tier II Miscellaneous Itemized Deductions• Collection/determination

of a tax liability• Unreimbursed employee

business expenses• Production of income• Deducted only to the

extent that the total exceeds 2% of AGI

2-11

Deductions & Exemptions

2-12

Itemized Deduction Phaseout

Itemized deductions reduced by lesser of:• 3% of excess of AGI over threshold

amount, or• 80% of the allowable itemized deductions

2-13

Filing Status ThresholdSingle $258,250Head of household

$284,050

Married filing jointly

$309,900

Personal Exemption Phaseout

Personal and dependency exemptions are reduced by:• 2% for each $2,500 (or portion thereof) by

which AGI exceeds threshold amount

Filing Status Threshold

Single $258,250

Head of household

$284,050

Married filing jointly

$309,900

2-14

Review Question 1

All of the following are itemized deductions excepta. local income taxes.b. investment interest expense.c. casualty and theft losses.d. qualified student loan interest.

2-15

Review Question 2

Taxable income is the amounta. remaining after adjustments to income

are subtracted.b. from which allowable itemized

deductions are subtracted.c. used to determine the tax liability.d. to which tax credits are applied.

2-16

Review Question 3Janet and Bruce Robinson, both age 68, are married taxpayers filing jointly with itemized deductions consisting of the following:

Their AGI for 2015 is $462,100. What is the amount of their allowable itemized deductions?

a.  $34,400b. $35,034c.  $40,495d.  $58,955

2-17

Home mortgage interestState income taxesProperty taxesCharitable contributionsTax return preparation feeUnreimbursed medical expenses

$19,500$8,700$5,200$6,200

$895$18,460

Review Question 4

Tyler and Liz Slater, married taxpayers filing jointly, have two dependent children. Their AGI for 2015 is $360,150. What is the amount of personal and dependency exemptions that the Slaters may deduct? a.$6,720b.$9,280c.$9,600d.$16,000

2-18

©2015, College for Financial Planning, all rights reserved.

Session 2End of Slides

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMIncome Tax Planning