AGI - very important number
Finally, after adding your income from all sources and subtracting the adjustments to your income, you come to your adjusted gross income. This number, frequently called AGI, is an important number and is usually at the botto...
After reporting small business or self-employment income on Schedule C, report any capital gains or losses on Schedule D. A lot of people won't have any capital gains transactions, but if you sell securities or other capital assets held outsi...
Since most people won't itemize, they can tune out this next section, but if you're one of the 25 percent of people who do itemize, here's the skinny on what you can or can't deduct on Schedule A.
The first deductible item is for medic...
Taxes are a big part of your budget
By now you're almost done. You've figured out your total tax liability, and requested a refund or written a check for the amount you owe. But I'd suggest you take a pause here.
Look at the total tax you paid this ...
After you've made the decision to itemize or not, most of the rest of your journey is downhill. Your taxable income is simply your AGI minus your exemptions minus your deductions.
This is the place where your filing status comes into ...
Schedule E - rents
Next comes Schedule E. Schedule E is a kind of catch-all form that shows miscellaneous income.
If you own rental housing, fill out the front side of Schedule E. Up at the top you'll show your income from rent. Then you have plenty...
After adding in any taxable Social Security, you'll have to add in all other forms of taxable income that you received. Some items that you'll have to include are gambling winnings or other prizes.
Note that gambling operations are requ...
Social Security benefits
After completing Schedule E we're back to Form 1040. If you receive Social Security benefits, you'll also receive a Form SSA-1099 that shows your total benefits for the past year. You'll have to list your total benefits on your ...
After filling in any net capital gains income on Schedule D, you'll come back to Form 1040 where you'll have to include any retirement or pension income which you've received. Money that you stash into your 401(k) or IRA account is tax-deferred, but it's ...
What is taxable income?
Now we come to the part of Form 1040 where we start to put in numbers. For starters, you need to report your income.
A lot of people take this part for granted. They just fill in their income, as reported on W-2s or 1099s, an...
Business income (Schedule C)
After alimony, you'll have to report any business income or losses you may have. If you have a small business, you should report your income and losses separately on Schedule C or Schedule C-EZ.
So if you have a small, u...
Interest income follows wage income on your 1040. If you received more than $10 in interest from a bank or other financial institution, you should receive a 1099-INT. This should include payments from individual bonds that you hold, but ...
Exemptions - different from deductions
Next come your exemptions. Each exemption you claim can lower your taxable income by about $2,500, and this amount increases each year with inflation.
Note that exemptions have nothing to do with your deduction...
By now you've determined that you need to file a return, so set's figure out which form to use. There are three flavors of the 1040 individual income tax return.
The easiest is obviously Form 1040EZ. This is a one page form with only a few...
Do you have to file?
Before you dive in and start to prepare your income taxes, you should see if you even have to file a return. Each year over a million people needlessly file returns. You shouldn't be one of them.
Your age and how much you earned ...
Records you'll need to prepare your return
So to help prevent you from becoming the next Willie Nelson, let's take a look at what you'll need in terms of records, and how long you should keep these records.
The statute of limitations for federal inc...
Introduction to "Income Tax Planning".
Hello, and welcome to "Income Tax Planning for Everyone", by David Luhman.
David, after graduating with special honors in aerospace engineering and journalism from the University of Colorado in Boulder, went to J...