Itemized Deductions

Question 1

What is the calculation for deductible medical expenses?

Answer 1

qualified medical expenses - insurance reimbursement = qualified medical expenses paid

qualified medical expenses paid - 7.5% of AGI = deductible medical expenses

Question 2

What are the nondeductible taxes?

Answer 2

Federal, inheritance, business (FIB)

Question 3

When is interest on home equity loans/mortgages (up to $750k) deductible?

Answer 3

When it is used to buy, build, or substantially improve the taxpayer’s home that secures the loan. If the proceeds are used for personal reasons, then it is not deductible, even if the home is set as collateral

Question 4

The deduction for interest on investment indebtedness is similar to…

Answer 4

gambling in the sense that it is limited to the net investment income (winnings) for the year…any excess amount is carried forward indefinitely

Question 5

AGI limitations for charitable contributions depends on type of property contributed and type of charity receiving the contribution

Answer 5

Public Charities:
60% of AGI for cash
50% of AGI for ordinary income property
30% of AGI for LT capital gain property

Private Operating Foundations:
60% of AGI for cash
50% of AGI for ordinary income property
30% of AGI for LT capital gain property
(actively conducts activities and distributes funds to its own programs)

Private Nonoperating Foundations:
30% of AGI for cash
30% of AGI for ordinary income property
20% of AGI for LT capital gain property
(distributes funds to other charitable organizations)

Question 6

What is the calculation for deductible casualty losses?

Answer 6

whatever is the smaller loss between the decreased FMV or the lost cost/adjusted basis - insurance recovery = taxpayer’s loss

taxpayer’s loss - $100 = eligible loss

eligible loss - 10% of AGI = deductible loss