Income Tax, Fundamentals And Calculations: itemized deductions

Question 1

What are the major itemized deductions?

Answer 1

Medical expenses

Taxes

Interest

Charitable contributions

Casually losses , limited

Question 2

What are miscellaneous itemized deductions?

Answer 2

Impairment related work expenses

Gambling losses, but only to the extent of net winnings included and gross income

Annuity contract basis recovery

Pro rata portion of a state taxes, paid with respect to income in respect of the decedent

Question 3

Itemize medical deductions are subject to what of AGI?

Answer 3

7.5% and must not be reimbursed

Question 4

Our funerals and unnecessary cosmetic surgery covered under medical deductions

Answer 4

No

Question 5

Are transportation and lodging included in deductible medical expenses

Answer 5

Yes, subject to 7.5% of AGI four also includes any person who must travel with the patient

Question 6

Are expenditures for accident and health insurance premium deductible

Answer 6

Yes, subject to the 7.5% of AGI floor

Paid by the employer, they are not deductible by the employee

Question 7

What are the special rules for self-employed individuals for health insurance premiums deductibility

Answer 7

Hundred percent of the health insurance premiums can be deducted for AGI

Question 8

Are premiums paid for a tax qualified, long-term care insurance premium deductible

Answer 8

Yes, 7.5% of AGI floor maximum deductible premium depends on taxpayers age

Question 9

What is the aggregate limit for income and property taxes that are deductible?

Answer 9

$10,000 married

Question 10

How are real estate taxes and assessments taxed?

Answer 10

Deductible as an itemized deduction, regardless with who pays them

Must be based on the value of the property

Assessments impose for purpose of local benefit, usually are not deductible, but added to the basis of the property

Question 11

How is interest treated for tax purposes on funds borrowed to acquire investment assets

Answer 11

Deductions for investment interest are limited to net taxable investment income

Investment income includes gross income from interest , dividends, annuities, and royalties

Qualifying dividends are not included in investment income

Capital gains tax at the capital gain rate are not included in investment income

Cannot be derived in the ordinary course of business

Does not include tax, exempt interest income

Question 12

What are the rules to be able to deduct qualified resident interest?

Answer 12

Interest paid or cured on death. The purchase of a qualified residence of the taxpayer is deductible.

Includes a primary residence and one other residence

May include a condo , trailer, boat with living quarters and mobile homes

Debt must be secured by the property

Max allowable acquisition indebtedness for loans incurred is 750,000 and includes home equity loan secured by the relevant property where the proceeds were used for acquisition or substantial home improvements

Question 13

How are interest paid as points treated for deductibility purposes?

Answer 13

Points on a home loan are deductible in the year paid principal resident loans only

A borrower is treated as paying any points The seller paid for the borrowers mortgage.

A borrower, candid points up to the funds provided plus seller paid points

Buyer must reduce spaces in home by points paid by the seller seller reduces the amount realize by this amount

Question 14

Is a prepayment penalty deductible?

Answer 14

Yes, considered an interest payment

Question 15

Can interest pay to related parties be deductible

Answer 15

Yes, according to normal interest rules

Question 16

Can interest paid on behalf of another be deducted

Answer 16

No

Question 17

If interest is paid for business use or production of income is it deductible?

Answer 17

Yes, for AGI

Question 18

Section 165 are losses of nonbusiness property and are limited to losses from federally declared disaster losses must meet the following three criteria

Answer 18

Identifiable event caused the loss

Property damage results

Event is sudden , unusual and unexpected

Question 19

It casually loss must be deducted in what year of the loss

Answer 19

The year the loss occurred

Unless the president declares a disaster area losses may be deducted in the year proceeding the actual loss if previous years taxes have been filed taxpayer may file an amended return

Question 20

How do you measure the amount of casualty losses?

Answer 20

Amount of the loss is the lesser of the adjusted basis or decline and fair market value, resulting from the event

Losses from property held for partial business and partial personal use are determined separately for each portion

Reduced by any insurance proceeds received

Appraisal or cost of repairs are generally required

Question 21

Directions for casually losses on personal use property is reduced both by what floor and by what percentage of AGI

Answer 21

$100 floor and 10% of AGI