6. Itemized Deduction Flashcards
What amount of qualified medical expenses may be deducted?
Amounts paid for qualified medical expenses that exceed 7.5% of AGI may be deducted.
When and for whom must a medical expense be paid to qualify for the deduction?
To qualify for a deduction, an expense must be paid during the taxable year for the taxpayer, the taxpayer’s spouse, or a dependent and must not be compensated for by insurance or otherwise during the taxable year.
When are medical expenses charged on a credit card deductible?
Medical expenses charged on a credit card are deductible in the year the medical expenses are incurred, not when the credit card bill is paid.
To qualify as a dependent for the medical expense deduction, what criteria must a person meet?
The person
1.Must have over half of his or her support for the year paid for by the taxpayer;
2.Must fall within a family relationship (including adopted children or any other person who lived with the taxpayer all year as a member of the taxpayer’s household); and
3.Must be a citizen, national, or resident of the U.S., Canada, or Mexico during a portion of the tax year.
Examples of deductible medical expenses include amounts paid for
1.The diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body
2.Medical insurance
3.Qualified long-term care premiums and services
4.Smoking cessation programs and prescribed drugs designed to alleviate nicotine withdrawal
5.Transportation primarily for and essential to medical care
Is a medical expense deduction allowed for amounts paid for any activity or treatment designed merely to improve an individual’s general health or sense of wellness?
No, not even if the activity or treatment was recommended by a physician.
May a taxpayer deduct the costs of any medicines or drugs purchased?
No, only medicines and drugs that require a prescription (except insulin) are qualified medical expenses.
If a taxpayer installs permanent improvements to existing structures primarily for medical care, what amount may that taxpayer deduct as a medical expense?
The excess of the cost of a permanent improvement over the increase in value of the property is a deductible medical expense.
May a taxpayer deduct amounts paid for transportation essential to (and primarily for) medical care?
Yes. This amount also includes the transportation cost of traveling to a warm climate on a doctor’s order to alleviate a specific chronic ailment.
May a taxpayer deduct the costs of premiums paid for medical insurance that provides for reimbursement of medical care expenses?
Yes, these amounts are deductible.
Is the basic cost of Medicare insurance (Medicare Part A) generally deductible?
No. The basic cost of Medicare insurance (Medicare Part A) is not deductible unless voluntarily paid by the taxpayer for coverage.
Can a decedent’s own medical expenses be deductible if they are paid by his or her estate within 1 year beginning on the day after the decedent’s death?
Yes, if a decedent’s own medical expenses are paid by his or her estate within 1 year beginning on the day after the decedent’s death, the expenses may be deducted on the decedent’s tax return for the year incurred.
Who is allowed to deduct state and local real property taxes?
State and local real property taxes are deductible by the person upon whom they are imposed.
When are state and local property taxes deductible?
They are deductible in the year they were paid or accrued.
If real property is bought or sold during the year, how is the real property tax apportioned between the buyer and the seller?
The real property tax is apportioned between the buyer and seller on the basis of the number of days each one held the property during the real property tax year.
Are special assessments for local improvements deductible?
No, they increase the basis of the property and are not deductible.
When are ad valorem and personal property taxes deductible?
Only when the tax is
1.Actually imposed,
2.Imposed on an annual basis, and
3.Substantially in proportion to the value of the property.
Are state income taxes deductible?
Yes, state and local income taxes are deductible.
Are foreign income taxes paid deductible if the Foreign Tax Credit (FTC) is claimed?
No, they are not deductible if the FTC is claimed.
Some examples of taxes that are not deductible include
1.Federal taxes on income, estates, gifts, inheritances, legacies, and successions;
2. State taxes on cigarettes and tobacco, alcoholic beverages, gasoline, licensing/registration, estates, gifts, inheritances, legacies, and successions;
3. Licensing/registration fees of highway motor vehicles (if based on weight instead of value); and
4. Sales tax on business property.
