Table of Contents

Course Learning Objectives v

Introduction to the Course v

Chapter 1  Changes in Various Limits 1

Chapter Learning Objectives 1

Introduction. 1

Standard Mileage Rates 1

Business Use of a Taxpayers Personal Vehicle 1

Personal Vehicle for Charitable Purposes 2

Use of a Taxpayers Personal Vehicle to Obtain Medical Care 2

Use of a Taxpayers Personal Vehicle to Move 2

Standard Deduction Increased. 3

Standard Deduction for Blind and Senior Taxpayers 3

Standard Deduction Eligibility. 3

Exemption Amount 3

Alternative Minimum Tax (AMT) 3

Tax Preference Items Added Back to Produce Alternative Minimum Taxable Income 4

Alternative Minimum Tax Exemption Amount Increased. 4

Education Savings Bond Program. 5

Qualified Education Expenses 5

Eligible Educational Institutions 5

Qualified Education Expenses Reduced by Certain Tax-free Benefits Received. 5

Figuring the Tax-Free Amount 6

Education Savings Bond Program Eligibility Subject to Income Limits/Filing Status 6

Determining Taxpayers Modified Adjusted Gross Income 8

Limitation on Itemized Deductions 8

Qualified Long-Term Care Insurance Premiums and Benefits 8

Favorable Benefits Tax Treatment Reserved for Chronically-Ill 8

Tax-Qualified Long Term Care Premiums Deductible within Limits 8

Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits 9

Social Security Taxable Earnings Limit 9

Maximum Capital Gain/Dividend Tax Rate Increased for High-Income Taxpayers 10

Summary. 10

Chapter 1 Review Questions 14

Chapter 2  Tax Credit Changes 15

Chapter Learning Objectives 15

Introduction. 15

Retirement Savings Contribution Credit 15

Savers Credit Applicable to Range of Retirement Contributions 16

Savers Credit Eligibility Based on Income and Filing Status 16

Earned Income Credit 17

EIC Rules Applicable to Everyone 17

Adjusted Gross Income Limits 17

Valid Social Security Number Required. 18

Tax Filing Status 18

Citizenship or Residency. 18

Foreign Earned Income 18

Investment Income 18

Earned Income 18

EIC Rules That Apply if Taxpayer Has a Qualifying Child. 18

Relationship, Age, Residence and Joint Return Tests 18

Qualifying Child of More than One Person Rule 19

Taxpayer as the Qualifying Child of Another Taxpayer Rule 19

EIC Rules That Apply if Taxpayer Does Not Have a Qualifying Child. 20

The Age Rule 20

The Dependent of Another Person Rule 20

The Qualifying Child of Another Taxpayer Rule 20

The Main Home Rule 20

Figuring the Amount of the Earned Income Credit 20

Adoption Credit/Exclusion. 21

Eligible Child. 21

Qualified Adoption Expenses 21

The Benefit 22

Timing of the Credit/Exclusion. 22

Benefit Phased-Out at Higher Taxpayer MAGI 23

Summary. 23

Chapter 2 Review Questions 26

Chapter 3  PPACA-Related Tax Changes 28

Chapter Learning Objectives 28

Introduction. 28

Summary of Existing PPACA-Related Tax Requirements 28

Health Flexible Spending Arrangement Contributions 29

PPACAs Individual Shared Responsibility Provision. 29

Taxpayer Options Under the Shared Responsibility Provision. 29

Minimum Essential Coverage 29

Employer-Sponsored Coverage 29

Individual Health Insurance Coverage 30

Coverage Under Government-Sponsored Programs 30

Limited Benefit Coverage May Not Provide Minimum Essential Coverage 30

Exemptions from Penalty for Failure to Maintain Minimum Essential Coverage 31

Gaps in Coverage Shorter Than Three Consecutive Months 31

Exemption for Lack of Affordable Coverage 31

Qualifying for a Statutory Exemption. 32

Individual Shared Responsibility Payment 33

Refundable Premium Tax Credit to Assist in Purchase of Qualified Health Plan. 33

Eligibility for Credit 33

Federal Poverty Level 34

Qualified Health Plan. 34

Amount of the Credit 35

Benchmark Plan. 35

Taxpayers Expected Contribution. 35

Calculating the Credit 36

Adjusted Monthly Premium. 37

Special Rules Applicable to the Tax Credit 37

Reconciling Advance Premium Tax Credits 37

Small Business Tax Credit 38

Eligibility Requirements 38

Limitations Affect Health Insurance Premium Credit 39

Full-Time Equivalent Employee (FTE) Limitation. 39

Average Annual Wage Limitation. 40

Average Premium Limitation. 40

State Premium Subsidy and Tax Credit Limitation. 40

Calculating the Credit 41

Large Employer Shared Responsibility: The Employer Mandate 48

Employers Not Offering Coverage 48

Employers Offering Coverage 49

Summary. 50

Chapter 3 Review Questions 51

Chapter 4  Changes in Archer MSAs, HSAs & IRAs 52

Chapter Learning Objectives 52

Introduction. 52

Medical Savings Accounts 52

High Deductible Health Plan Requirement 52

Archer MSA Contributions 53

Penalty for Excess Contributions 54

Special Rules for Employer-Installed MSAs 54

Archer MSA Distributions 54

Archer MSA Rollovers 54

Account Transfer Incident to Divorce 55

Account Transfer at Death. 55

Archer MSA Taxation. 55

Contribution Tax Treatment 55

Distribution Tax Treatment 56

Archer MSA Distribution Tax Penalty. 56

Health Savings Accounts 56

HSA Eligibility. 57

HSA High Deductible Health Plan Requirement 57

HSA Contributions 57

HSA Contributions from Multiple Sources 57

Additional Contributions for Age 55 and Older Account Holders 58

First-Year Contributions for New Account Holders 58

Maximum HSA Contributions may be Reduced. 58

Penalty for Excess Contributions 58

Employer HSA Participation. 58

HSA Distributions 58

HSA Rollovers 59

Account Transfer Incident to Divorce 59

Account Transfer at Death. 59

HSA Taxation. 59

Contribution Tax Treatment 60

Distribution Tax Treatment 60

Tax-Free HSA Distributions 60

Taxable HSA Distributions 60

HSA Distribution Tax Penalty. 60

Roth IRA Eligibility. 61

Modified Adjusted Gross Income 61

Limits on Contributions 61

Traditional IRA Contributions by Active Participants 63

Tax Treatment of Contributions by Active Participants 63

Reduced Deductibility of Traditional IRA Contributions for Active Participants 63

Summary. 65

Chapter 4 Review Questions 68

Chapter 5  Tax Cuts and Jobs Act: Principal Individual Taxpayer Changes 69

Chapter Learning Objectives 69

Introduction. 69

Tax Cuts and Jobs Act of 2017. 69

Individual Tax Rate Changes 69

Exemptions and Deductions 70

Credits 70

Tuition Savings Plans 71

IRA Recharacterization. 71

Individual Responsibility Penalty under ACA. 71

Estate and Gift Tax Exemption. 72

Summary. 72

Chapter 5 Review Questions 74

Answers to Review Questions 75

Chapter 1 Review Questions Feedback. 75

Chapter 2 Review Questions Feedback. 78

Chapter 3 Review Questions Feedback. 82

Chapter 4 Review Questions Feedback. 85

Chapter 5 Review Questions Feedback. 88

Appendix A. 90

Glossary. 91

Index. 94

Final Examination. 98

CPASelfstudy.com Course Evaluation. 105