(
课件网) THE PERSONAL INCOME TAX Chapter 17 Computation of Federal Personal Income Tax Liability Start with Tax Base Wages and compensation, interest, dividends, capital gain (or loss), business income (or loss), pensions, farm income (or loss), rents, royalties, Social Security benefits, etc. Subtract by “Above-the-line” deductions Trade or business expenses, moving expenses, educator expenses, self-employed health insurance premium payments, student loan payments, tuition and fees, alimony paid, etc. Equals Adjusted Gross Income Subtract Exemptions Phaseout with income Compare Larger of: Standard Deduction or Itemized Deductions Charitable contributions, home mortgage interest, state and local taxes, medical expenses in excess of 10% of AGI, casualty and theft losses, non-reimbursed employee expenses; Differs by filing status Phaseout with income Equals Taxable Income Apply Tax Rate Seven ordinary rates (10%, 15%, 25%, 28%, 33%, 35%, 39.6); differs by filing status; special rates for dividends and capital gains Equals Tax Liability Before Credits Subtract Tax Credits Child tax, additional child tax, EITC, HOPE and Lifetime Learning, electric vehicles, health coverage tax, adoption, mortgage interest, retirement savings contribution, child and dependent care credit, credit for the elderly or the disabled, D.C. First-Time homebuyer’s credit, etc. Phaseout with income Equals Regular Tax Liability Start over to determine AMT tax liability using AMT base. Pay tentative AMT liability in excess of regular tax liability Then Pay Tax or Claim Refund Incur additional compliance, administration, and efficiency costs 17-* Haig-Simons Income (Comprehensive Income) Income = Consumption + DNet Worth Maximum consumption taxpayers can enjoy without spending down their wealth Anything received that can be used, either now or later, to purchase goods and services Subtract costs of earning income 17-* Items Included in H-S Income Employer pension contributions and insurance purchases Transfer payments, including Social Security benefits, unemployment compensation, and welfare Capital gains Realized versus unrealized Income in-kind 17-* Some Practical and Conceptual Problems Computing income net of business expenses Computing capital gains and losses Valuing in-kind services 17-* Evaluating the H-S Criterion Equity – treats likes alike Efficiency – treats all forms of income the same so that decisions are made on the basis of economic value, not tax consequences 17-* Excluded Forms of Money Income Interest on State & Local Bonds Some dividends Capital gains Employer contributions to benefit plans Some types of saving Individual retirement account (IRA) Roth IRA 401(k) plan Keogh plan Education savings account Gifts and Inheritances 17-* Interest on State and Local Bonds Tax break reduces interest rate S&L governments have to pay Market ROR on Taxable Bonds = ip = 15% Individuals MTR = t = 30% Government T ... ...
