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Taxation

Modified Adjusted Gross Income (MAGI)

Modified adjusted gross income, or MAGI, is a variation of adjusted gross income. There are different MAGIs computed for different purposes.

In the context of Planned Giving and our Planned Giving Manager software, MAGI determines whether a taxpayer is subject to the Net Investment Income Tax (Medicare Surtax). In this case, MAGI equals AGI plus any foreign earned income exclusion.

Taxpayers with a MAGI above the applicable threshold pay Medicare surtax on the lesser of (1) net investment income or (2) the amount by which MAGI exceeds the threshold.

Massachusetts 2-G

The Massachusetts 2-G is a Massachusetts state tax form for reporting income, deductions, credits, etc. of a grantor-type trust.  Massachusetts charities report pooled fund income to their Massachusetts participants on this form.

Depreciation

Depreciation is a reduction in the stated value of commercial property, such as the assets of a business, for financial purposes.  The amount of depreciation taken in a particular tax year is deductible from the taxes owed by the owner of the depreciated property, but also reduces the owner's cost basis in the property.  Straight-line and accelerated are just two of several forms of depreciation.

Deceased Spousal Unused Exclusion

This is the amount of gift and estate tax lifetime exclusion unused by a person's deceased spouse and therefore available for use by the surviving spouse in addition to his or her own gift and estate tax exclusion.  If a person has survived more than one deceased spouse, only the unused exclusion of the last deceased spouse is available.

Death Tax

Death tax is a state tax that is assessed on the assets in a person's estate after the person dies. Until The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the death tax schedule in many states exactly matched the state death tax credit schedule applicable to federal estate taxes (the so-called “sponge” tax).  The result was that in these states the total of federal estate tax and state death tax equaled the federal estate tax that would be due if there were no state death tax.

Capital Gain Income Tax

Capital gain income tax is the tax assessed on capital gain income, the income that is reported on Schedule D of Form 1040.

The taxation of capital gain income is complicated. It depends on the type of property that was sold, the length of time that the seller held the property, and the seller's taxable income.

Capital Gain Income

Capital gain income is income that is reported on Schedule D of Form 1040. Capital gain income is reported when a taxpayer sells appreciated property. Typically, the seller must report all the appreciation in the property as capital gain income.

Capital Gain

Capital gain is the difference between what a person paid for an asset and its current fair market value.  For example, if a person purchased some stock for $5,000 and the stock is now worth $15,000, the person's capital gain in the stock is $10,000.

Capital gain in property that has been held for longer than one year is called long term capital gain and is taxed at capital gain tax rates.  Capital gain in property that has been held for one year or less is called short term capital gain and is taxed at ordinary income tax rates.

Annual Gift Tax Exclusion

In 2015, the first $14,000 that a taxpayer gives to another individual each year is excluded from gift tax under the annual gift tax exclusion.  For example, a couple with three children can give $78,000 away to their children each year without making a taxable gift.  This is because there are two donors and three recipients: 2 x 3 x $14,000 = $84,000.

Alternative Minimum Tax

The alternative minimum tax (AMT) is an income tax that is designed to assure that taxpayers with large deductions pay at least a minimum amount of income tax.

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