HS 321 Income Taxation cheat sheet

Income Taxation

• Gross income under IRC §61 includes all income from whatever source derived unless specifically excluded; exclusions (gifts, inheritances, life insurance proceeds, tax-exempt interest, qualified scholarships for tuition) must be found in the Code.

• Filing status thresholds for the standard deduction (2024): single $14,600; married filing jointly $29,200; head of household $21,900; additional deduction $1,550 (single) or $1,950 (MFJ) per taxpayer age 65+ or blind.

• Marginal rate brackets are progressive: for a single filer (2024) 10% to $11,600, 12% to $47,150, 22% to $100,525, 24% to $191,950, 32% to $243,725, 35% to $609,350, 37% above; long-term capital gains and qualified dividends use 0/15/20% preferential rates.

• Basis rules: cost basis for purchases; carryover basis for gifts (donor's basis, plus gift tax on appreciation); stepped-up (or stepped-down) fair market value basis at death under §1014.

• Character and holding period: capital asset held more than one year yields long-term gain/loss; net capital losses deductible against ordinary income only up to $3,000 per year ($1,500 MFS), with excess carried forward.

• Adjustments and deductions: above-the-line adjustments (IRA, HSA, self-employment tax half, student loan interest) reduce gross income to AGI; below-the-line itemized deductions include medical expenses above 7.5% of AGI, state/local taxes capped at $10,000, mortgage interest, and charitable contributions.

• Filing requirement depends on gross income versus the standard deduction plus additional amounts for age and blindness, and on self-employment income of $400 or more; dependents have separate, lower thresholds.

• Withholding and estimated tax: pay at least 90% of current-year tax or 100% of prior-year tax (110% if prior-year AGI exceeded $150,000) to avoid the underpayment penalty.