Chapter 4 Flashcards
Last year, Jacques paid the following interest:
Interest on home mortgage $7,300
Interest on loan to purchase furniture for personal residence $1,000
Interest on a car loan $1,800
If Jacques itemizes his deductions for last year, what is the amount of deductible interest expense?
$7,300
$8,300
$9,100
$10,100
$7,300
Only the Home mortgage counts
Which of the following is an itemized deduction? Medical expenses A contribution to an HSA A contribution to a traditional IRA Student loan interest.
Medical Expenses
Which of the following are below the line income tax deductions?
Medical expenses Student loan interest Contributions to an IRA Charitable contributions 1 and 3 1 and 4 1, 2, and 3 1, 2, 3, and 4
1 and 4
Medical expenses and Charitable Contributions are below the line
Jack purchased a personal residence for $180,000, and insured it for the full replacement value. It had a fair market value of $195,000 when it was damaged by a fire. The fair market value after the fire was $155,000, and Jack received insurance proceeds of $15,000. What is the net amount of casualty loss that Jack can deduct if his adjusted gross income is $80,000?
Group of answer choices
$11,000
$16,900
$17,000
$25,000
$16,900
180,000-155,000=25,000-*8,000-100= $16,900
8,000= (80,000.1)
Colby has decided to make charitable contributions of property this year. He donates a painting (long-term capital gain property) he bought at an auction (purchased for $900, fair market value $40,000) to a local art museum (a public charity). His adjusted gross income is $70,000. What is his charitable deduction for this year? $0 $900 $21,000 $40,000
$21,000
70,000*.3
Which of the following is not one of the main categories of itemized deductions found on Schedule A?
Individual Retirement Accounts contributions
Charitable contributions
Casualty losses
Mortgage interest
Individual Retirement Accounts contributions
During the current year, Austin, a self-employed individual, paid the following amounts:
Federal income tax - $5,000 State income tax - $3,000 Real estate taxes on land - $800 State sales taxes - $600 What amount can Austin deduct as taxes by itemizing his deductions?
Group of answer choices
$1,400
$3,600
$3,800
$4,400
$3,800
$3,000+800 (state income tax and real estate taxes can be deductible as itemized)
All other things being equal, the tax benefits of a tax credit outweigh the tax savings produced by a tax deduction because of which of the following?
It reduces a taxpayer’s capital gains.
It reduces a taxpayer’s taxable income.
It reduces a taxpayer’s tax liability.
None of these
It reduces a taxpayer’s tax liability.
In 2019, Andrea and Elliott are married and together they have AGI of $80,000. They are both 50 years old. They have no dependents and they file a joint federal income tax return. During 2019, they paid the following amounts for medical care, for which they were not reimbursed by insurance:
Doctor and dentist bills: $3,600 Prescription drugs: $1,800 Cosmetic surgery: $5,500 Health insurance premium: $9,600 Over the counter pain killers: $700 Determine the deduction allowable for medical expenses paid during that year.
$9,000
$14,500
$15,200
$5,400
You are correct about the items that can be claimed and those that cannot. You can only claim the amount of medical expenses that is over 7.5% of AGI though, so you must subtract $6,000 from $15,000.
80,000*.075=6,000
It’s 2016 and Samantha is a licensed social worker who is enrolled in law school on a part-time basis. She spent $35,000 on tuition. Is any portion of her law school tuition deductible (assume she chooses not to claim any education credits)?
Samantha can deduct $4,000 of the law school expenses regardless of whether she chooses to itemize deductions.
Samantha can deduct $2,000 of the law school expenses if she uses itemized deductions.
Samantha can deduct $4,000 of the law school expenses if she uses itemized deductions.
None of the above.
The Tuition and Fees deduction is above the line (i.e., you take it regardless of whether you itemize) and can go up to $4,000.
What is the amount of dependent care credit for a couple with two children where they spend $5,000 for dependent care and the husband earns $40,000 for the year and the wife earns $4,500 before the income tax limitation? $1,000 $0 $900 $990
$900
What is the amount of dependent care credit allowed Sally Smith, a divorcee, who pays $3,100 for the year to send her daughter to a babysitter while she works? The daughter is claimed as a dependent by the father. Sally has adjusted gross income of $16,500 for the year.
Group of answer choices
$1,085
$500
$1,054
$1,020
$1,020
Eligible care costs are the lesser of:
Actual care costs: $3,100
The cap ($3,000 for one child or $6,000 for two children): $3,000
For married couples, the lower income of the two spouses: N/A
The lesser of the three above is $3,000
Next we need to look up the AGI in the table in slide 39. With an AGI of $16,500, the applicable percentage is 34%.
$3,000*34%=$1,020
Joe College is married and attends State University for 12 months. Joe and his wife have two children. Mrs. College works to help put Joe through school. The children, who are four and five years old, are kept at Sleepy Time Day Care School. The Colleges paid the school $4,600 this year to keep the children. The Colleges had adjusted gross income of $10,000 this year, all of which was earned by Mrs. College. What amount may the Colleges claim as a child care credit?
Group of answer choices
$480
$920
$1,610
$1,200
$1,610
$4,600 *.35%
What is the earned income credit Don Andersen can claim in 2019 assuming he has adjusted gross income of $8,500 and earned income of $5,000? He maintains a household for his daughter. $0 $2,890 $3,373 $1,700
$1700
Sam and Betty Taylor maintain a home and they have two children. Their earned income in 2019 was $20,000 and adjusted gross income was $21,000. They file a joint return. What is the amount, if any, of their earned income tax credit for the year?
Group of answer choices
$8,000
$5,828
$3,400
$0
$5,828
