Question

Brice is a single, self-employed electrician who earns $60,000 per year in self-employment income. Brice paid the following expenses this year. Which of the expenses are deductible for AGI? a. The cost of health insurance (not purchased through an exchange) b. The employer portion of self-employment tax paid c. Penalty on early withdrawal of funds from a certificate of deposit

Answer 1

The correct answer is all of them. Options "A", "B", and "C" are correct.

Step-by-step explanation:

AGI stands for Adjusted Gross Income. It is a term fro the internal revenue code that refers to a number used on the Form 1040 U.S. individual tax return. AGI helps to determine a person's income taxes due. The formula for the AGI is:

(Gross Income from taxable sources - allowable deductions)

Among those above the line deductions, we can find:

• Some retirement plan investments, such as Individual Retirement Accounts (IRA), SIMPLE IRA, SEP IRA.
• Healthcare savings account (HSA).
• Part of of the tax on self-employment.
• Early withdrawal penalties levied by financial institutions.
• Losses resulting from the selling or transfer of assets.
• School tuition, fees and interest in student loans.

As we can see, all the choices given in our case are eligible to be deducted in the AGI.