R2 (1) - ADJUSMENTS AND ITEMIZED DEDUCTIONS

Question 1

II. ADJ USTMENTS TO GROSS INCOME TO ARRIVE AT AGI (Deductions To Arrive at AGI)

Answer 1

Refer to w/P R2.1.1 - Table of summary

Question 2

III. DEDUCTIONS F ROM ADJUSTED GROSS INCOME (A GI)

Answer 2

A. Standard Deduction

B. Itemized Deduction

Question 3

A. Standard Deduction - 1040 EZ

Below the line (AGI) deductions

Answer 3

2014

Single $6,100
Head of household $9,100
Married Filling jointly or surviving spouse $ 12,400
Married Filing separately $6,200

Question 4

A. Standard Deduction - Additional Deduction for the Elderly or Blind

Answer 4

1 Qualified
65 OR Blind Single $1,500 Married$ 1,200
Both 65 AND Blind Single $3,000 Married $2,400

2 Qualified
65 OR Blind Single 0 Married $2,400
Both 65 AND Blind Single 0 Married $4,800

Question 5

B. Itemized Deductions - Limitation

Answer 5

Phase out start only when AGI exceeds:-

Married jointly                   $305,050
Heads of household         $279,650
Single                                 $254,200
Married separately            $152,525

Question 6

B. Itemized Deductions - Medical Expenses (Payments)

Answer 6

(1) Filing taxpayer
(2) Spouse
(3) Dependent who received over half his or her support from the filing taxpayer

Question 7

B. Itemized Deductions - Medical Expenses (Timing )

Answer 7

1- Incurred as an expense.

2- Paid or charged before year-end.

Question 8

B. Itemized Deductions - Calculation of Medical Expenses ( )

Answer 8

Deductible Medical Expenses:-

                   Qualified Medical Expenses

              = Qualified Medical Expense " Paid"

Question 9

B. Itemized Deductions - Types of Deductible Medical Expenses

Answer 9

(1) Medicine and drugs
(2) Doctors
(3) Medical and accident insurance
(4) Required surgery Required surgery
(5) Transportation to medical facility
(6) Physically handicapped costs

Question 10

B. Itemized Deductions - Nondeductible Medical Expenses)

Answer 10

1- Elective surgery, elective cosmetic operations, drugs that are against the law, travel, vitamins,
2- Life insurance
3- Capital expenditures
4- Health club memberships
5- Personal hygiene & other ordinary personal expenses
6- Insurance Reimbursement

Question 11

B. Itemized Deductions - Real Estate Taxes (state, local, and foreign taxes)

Answer 11

1- The taxpayer must be legally obligated to pay
2- Prorate taxes in year of sale/purchase
3- Taxes paid under protest are deductible
4-Real estate taxes do not include street, sewer..etc.

Question 12

B. Itemized Deductions - Income Taxes (state, local, and foreign taxes)

Answer 12

1-Estimated taxes paid during the year are deductible
2-Withheld taxes from paychecks during year deductible
3- Assessments paid during year for prior year’s tax deductible
4-Refunds are an item of gross income and should not be netted against the itemized tax deduction

Question 13

B. Itemized Deductions - Personal Property Taxes (state and local taxes)

Answer 13

Deductible

Question 14

B. Itemized Deductions - Sales Tax (state and local taxes)

Answer 14

A taxpayer may elect to deduct either state and local income taxes or state and local general sales taxes

If the sales tax is chosen to be deductible, the amount is determined by either :-

(a) . The total of actual general sales taxes paid
(b) . The relevant I RS table, plus any amount of sales tax paid for a motor vehicle, boat or other I RS approved items.

Question 15

What are Nondeductible Taxes

Answer 15

1- federal taxes (including Social Security)
2- Inheritance taxes for states(federal estate pick-up tax)
3- Business and rental property taxes

Question 16

B. Itemized Deductions - Interest Expense

Answer 16

1- Home
2-Investment
3- Personal
4- Prepaid
5- Education

Question 17

B. Itemized Deductions - Interest Expense (Home Mortgage)

Answer 17

1- Acquisition Indebtedness ($1, 000,000 [$500,000 MFS] maximum)

2-Incurred in buying, constructing, or substantially improving the taxpayer’s principal and second home

3- Home Equity Indebtedness ($1 00, 000 [$50, 000 MFS] maximum)

Question 18

B. Itemized Deductions - Interest Expense (Investment)

Answer 18

The investment interest deduction for individuals is limited to net (taxable) investment income.

Exclude :- Interest expense used to purchase tax-free bonds is not deductible (because the interest earned on the bonds is not taxable

Question 19

B. Itemized Deductions - Interest Expense (Investment)

Answer 19

Not Deductible

Question 20

B. Itemized Deductions - Interest Expense (Prepaid)

Answer 20

Allocates to proper period.

Question 21

B. Itemized Deductions - Interest Expense (Educational Loan)

Answer 21

Adjustment/not itemized deduction