R2-M2 Itemized Deductions

Question 1

what requirements must be met in order for a single individual to qualify for ADDITIONAL standard deduction?

Answer 1

An individual must be age 65/older ($1,500/person) or blind ($1500/person) or both by the end of the tax year

Question 2

How to calculate deductible medical expense?

Answer 2

• Deduction = sum all allowable medical expenses - AGI floor (AGI x 7.5%)
• Expenses have to be incurred and paid. However, it is allowed for payments made by credit in the current year for medical expenses received in earlier years; or incurred in CY and credit charged by end of the CY although payment to credit card company has not been made by the time taxpayer file tax return in the following year
• wheelchair repair and school for handicapped are medical expenses

Question 3

How to calculate deductible donated property to charity?

Answer 3

• property is at FMV
• limitation is 30% of AGI
• allow if FMV is equal/under limitation amount?

Question 4

what are rules of state and local taxes paid?

Answer 4

• Never itemized FEDERAL income taxes and inheritance taxes for states
• state and local income taxes, personal property taxes, sales tax are limited to $10k in aggregate
• foreign real property taxes held as investment are NOT deductible

Question 5

what is itemized deduction rule for home equity debt?

Answer 5

is ONLY deductible when to buy, build, or substantially improve the taxpayer’s home that secures the loan

Question 6

what are rules for charitable contributions?

Answer 6

• a charitable contribution is not allowed for the value of services rendered to a charity
• a contemporaneous written acknowledge is required for donations of $250 or more, but limited to 60% of AGI
• a qualified appraisal for real property donations is not required to be attached to the tax return unless the property value exceeds $5000
• charitable deduction for LONG term appreciated stock/land is limited to 30% of AGI
• charitable deduction for SHORT term appreciated stock/land is the LESSOR of cost basis or FMV.
• donations to needy family and political purposes are NOT deductible
• excess of charitable contribution can be carryover up to 5 years

Question 7

what are rules for claiming person losses under casualty or theft?

Answer 7

• deductible only if the casualty or theft is qualified and declared disaster areas nationally.
• must itemized and loss must exceed 10% of AGI + $100 per casualty
• starting point is lesser of cost basis or decrease in FMV (before disaster FMV - after disaster FMV). Then, minus the insurance recovery then less $100 to get to eligible loss. Then, minus the 10% AGI to get to deductible loss

Question 8

what are miscellaneous itemized deductions? deducted from AGI

Answer 8

• Gambling losses (gambling winnings are reported in gross income)