Itemized Deductions

Question 1

Limitation of Itemized Deductions

Answer 1

Can be limited, which can limit taxpayers ability to take them

Question 2

Non-business and consumer interest

Answer 2

is generally not deductible

Question 3

Mortgage Debt Exception

Answer 3

• Interest on a debt secured by taxpayers principal residence or
• by a second residence used at least 14 days in the year
• is deductible if it is either:
  
  • acquisition indebtedness or
  • home equity indebtedness

Question 4

Acquisition indebtedness

Answer 4

Debt incurred to acquire, construct, or substantially improve a residence cannot exceed $1,000,000

Question 5

Home equity indebtedness

Answer 5

• Debt other than acquisition indebtedness, up to the amount of the taxpayer’s equity in the residence (i.e., fair market value less acquisition indebtedness)
• The aggregate amount of this indedbted ness cannot exceed $100,000

Question 6

Precondition of debt

Answer 6

• An enforceable debt must exist;
• if the note is intended as a gift, you cannot deduct;
• the indebtedness must be the taxpayers

Question 7

Federal taxes

Answer 7

are not deductible

Question 8

Local Taxes

Answer 8

• Real estate taxes, state or municipality taxes, and personal property taxes are deductible

Question 9

Taxes for another

Answer 9

Do not give rise to a deduction
AND
recipient would have income

Question 10

Charitable donations

Answer 10

RULE

• If made to a qualified charitable organizations = deductible up to:
  
  • 50% of donor’s AGI;
  • excess can be carried for up to 5 years
• Appreciate property:
  
  • deduction is often limited to the taxpayer’s adjusted basis

Question 11

What is a charity?

Answer 11

Generally, charities are defined as groups organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, and other charitable purposes enumerated in the Code

Question 12

Benefits Received

Answer 12

• The donation must be made with no expection of benefit
• If a beneift is recieved (e.g. ticket to fundraiser), the value of the benefit must be excluded from the deduction

Question 13

Record Keeping

Answer 13

• For contributions that exceed $250,000
• taxpayer must obtain by the time he files his return
• written acknowledgment from charity
• describing the property received and value of goods/services provided to donor in return

Question 14

Medical Expenses

Answer 14

RULE

• Can deduct medical expenses
• incurred by taxpayer, spouse, or dependant
• to the extent that the expenses exceed 10% of AGI

Question 15

Casualty Losses

Answer 15

RULE

• taxpayer can deduct a loss
• in excess of $100
• that she incurrs as property owner and as a result of a casualty
• which is an event due to some sudden unexpected or unusual cause
• but only extent that the aggregate amount of such losses exceeds 10% of her AGI

Question 16

Casualty Losses

Loses unreimbursed by insurance

Answer 16

Damage resulting from auto-accident, vandalism, fire, explosion, hurricane or similar disaster that is unreimbursed by insurance is deductible

Amount of the loss:

is the difference between the value of the property before the casualty and value of the property after the casualty

Question 17

Non-Business Bad Debts

Answer 17

If a taxpayer makes a loan of money that is not related to her business and did not arise out of her business, and that loan becomes worthless taxpayer can deduct the loss as a short-term capital loss, not as an ordinary deduction

Voluntary forgivenss = not considered a loss