Personal Expenses

Question 1

Are personal expenses deductible?

Answer 1

Absent express authority, personal, living, and family expenses are not deductible

Question 2

Interest Paid on Loan Secured by Taxpayer’s Residence (home mortgage)

Answer 2

This may be an itemized deduction–ask 2 questions:

(1) Were the loan proceeds used to buy, build, or improve the home?

• If NO, interest paid is not deductible
• If YES…

(2) Was the loan taken out on or before Dec. 17, 2017?

• If YES, interest allocable to the first $1 million of debt is deductible
• If NO, first $750,000

Question 3

State and Local Taxes Paid

Answer 3

Itemized deduction

Includes: real property taxes on home, state vehicle registration, state personal property taxes, state income tax, state sales tax

There is a $10,000 cap on this

Sales tax and income tax: cannot deduct both–deduct either state and local sales tax or state income tax

Question 4

Casualty Losses

Answer 4

Itemized deduction

A loss realized from a casualty (sudden or unexpected event that is a presidentially-declared disaster) or theft

Amount: loss in value of property or taxpayer’s basis in property, whichever is less

Deductible only to extent exceeds $100 and 10% of taxpayer’s adjusted gross income

example:

Casualty: $20,100

AGI: $8,000

20,100 - 100 - 8000 = $12,000 deduction

Question 5

Charitable Contributions

Answer 5

Itemized deduction

Payment made to a qualified donee, made with no expectation of a return benefit

Payment must be substantiated by written acknowledgment from the donee for any contributions worth $250 or more

Generally may not exceed 60% of AGI

Question 6

Medical Expenses

Answer 6

Itemized deduction

Expenses for medical care of taxpayer, spouse, ande dependants

Deductible to extent exceeds 10% of AGI

Drug costs only deductible for prescribed meds not over the counter