R2- Itemized Deductions

Question 1

Medical Expenses

Answer 1

Paid on behalf of-
-Yourself
-Spouse
-Dependent- SUPORT Test
S- Support over 50%
U-Under Taxable Income
P-No Joint Return
O-Only citizens
R-Relative
Or
T-Tax payer lives with whole yr

Question 2

Medical Expenses Formula

Answer 2

Qualified Medical Expenses
-Insurance Payment
=Qualified Medical Expense Paid
-7.5% of AGI
=Deductible Medical Expenses

Question 3

Qualified Medical Expenses

Answer 3

Medicine and Drugs, Including Medicare D Premiums
Doctors
Medical and Accident Insurance
Required Surgery
Transportation to medical facility- acutal cost, 23c per mile
Physically handicapped costs-
> removal of structural barriers

Question 4

Non-Deductible Medical Expenses

Answer 4

Elective Surgery, Cosmetic Surgery
Life insurance
Capital Expenditure- upto the increase in FMV on the property because of expenditure
Health Club Membership
Personal Hygiene expenses

Question 5

State, Local and Foreign Taxes

Answer 5

>Not Federal Taxes
>Real Estate Taxes
-Prorata in yr of purchase
-taxes paid, if refunded include in income
-Real estate taxes do not include, street, sewer, sidewalk assessment tax
>Income taxes
-estimated payments are deducted
-Refund items of gross income
>Personal Property Tax- state and local
>Sales Taxes-Not Deducted

Question 6

Non-Deductible Taxes

Answer 6

F-Fedaral taxes
I-Inheritance taxes
B-Business taxes and Rental Property taxes

Question 7

Interest Expenses

Answer 7

H-Home mortgage Interest
I-Investment Interest
P-Personal Consumer Interest- non-deductible
P-Prepaid Interest
E-Educational Loan interest- adjustment/not itemized

Question 8

Home Mortgage Interest

Answer 8

1st and 2nd home

1. Acquisition Indebtedness
   - Max 1,000,000 Excess personal
   - to buying, constructing home
2. Home Equity Indebtedness
   - Max 100,000 or FMV of property reduced by amount of debt=equity in home
   - Purpose of loan- any purpose

Question 9

Investment Interest Expense

Answer 9

• like gambling losses rules
• losses limited to income/ no negative dollars
• dividend income from borrowed funds not investment income
• interest expense used to purchase tax-free bonds no allowed
• Carryforward Indefinitely

Question 10

Personal consumer interest

Answer 10

Non deductible
Eg-
credit cards
life insurance loans
interest on tax under payments

Question 11

Prepaid Interest

Answer 11

Allocate to proper period
Deduct when:
1. incurred
2. paid

Question 12

Charitable Contributions

Answer 12

Charity- Items given to organizations-Deductible

Gifts- to Needy family- Non-Deductible
Political Contributions- Non-deductible

Question 13

Charitable Contributions rules

Answer 13

Overall 50% AGI Limit

1. Cash-50% AGI
2. Property- lesser of basis or FMV
3. Long term appreciated Property- lesser of
   - 30% of AGI
   - the remaining amount to reach 50% after cash contributions

Question 14

Charitable Contributions rules- Appreciated Property

Answer 14

Long term capital gain property

1. Deduct at FMV
2. 30%/50% AGI Limit and 20% limit for Private foundations
3. Combination Rules- Cash + Property Never over 50%

Question 15

Charitable Contributions rules- Consideration for contribution

Answer 15

If Taxpayer gets something out of the charity
ie. paid more price that what he should
excess price paid is charity
Total Charity
-Value Rec'd
=Charitable Deduction

Question 16

Casualty and Theft Losses

Answer 16

Sudden and unexpected loss
10% AGI limit
No loss claim if no insurance or insurance claim not filed
no loss deduction for lost, misplaced or broken property
loss may not exceed the basis

Question 17

Casualty and Theft Losses calculation

Answer 17

Smaller loss 
lesser of Adjusted Basis or decreased FMV
-Insurance Recovery
=Loss
-100
Eligible Loss
-10% AGI
=Deductible Loss

Question 18

Misc. Itemized Deductions 2% AGI Test- Unreimbursed Business Expenses

Answer 18

1. Travel, Meals and lodging- Overnight Rule
2. Transportation Expenses- 100% if To 2nd Job or Out of town
3. Meals and Entertainment-50% Deductible

Question 19

Misc. Itemized Deductions 2% AGI Test- Education Expenses

Answer 19

Don't confuse with education interest expense
must be job related
OK if -
Maintain or improve skill
req'd to retain job
NOT OK if-
minimum job reqmnts
if for new trade or business

Question 20

Misc. Itemized Deductions 2% AGI Test- Uniforms

Answer 20

buying,cleaning

Question 21

Misc. Itemized Deductions 2% AGI Test- Business Gifts

Answer 21

$25 per person per year

Question 22

Misc. Itemized Deductions 2% AGI Test- Business use of home

Answer 22

Ok if-
part of the home used exclusively
and on a regular basis for work purposes

Question 23

Misc. Itemized Deductions 2% AGI Test- Employment Agency Fees

Answer 23

job hunting expenses

Not for first job or entirely new profession

Question 24

Misc. Itemized Deductions 2% AGI Test- Expenses for investors

Answer 24

Safe Deposit box

or investment advice

Question 25

Misc. Itemized Deductions 2% AGI Test- Subscrption to journals

Answer 25

deductible

Question 26

Misc. Itemized Deductions 2% AGI Test- Tax Prep fees

Answer 26

No deductible for legal or accounting fees related to divorce

Question 27

Misc. Itemized Deductions 2% AGI Test- Debit card convenience fees

Answer 27

deductible

Question 28

Misc. Itemized Deductions 2% AGI Test- Activities not engaged in for profit

Answer 28

No Deduction
Exceptions-
1.Interest and taxes allowed, even if not for profit
2.a deduction equal to extent of gross income, no losses allowed
3. statutory presumption, activity is profit if it shows profit for 3 or more yrs out of 5 yrs
if breeding horses- if profit for 2 of 7 yrs

Question 29

Other Misc. Itemized Deductions NO 2% AGI Test-

Answer 29

fully deductible
gambling losses- fully deductible to the extent of gambling winnings

> Federal estate tax paid on income of a decedent