REG 2 - Itemized Deductions Flashcards
Explain the percentage of taxpayer’s AGI that is deductible (if any) for the following:
- Medical
- Taxes
- Interest
- Charity
- Casualty and theft losses
- Miscellaneous deductions
- Other miscellaneous deductions
1) Medical - 10% of AGI
2) Taxes - No AGI limitation
3) Interest - No AGI limitation
4) Charity - Up to 50% of AGI
5) Miscellaneous deductions - 2% of AGI
- Unreimbursed business expenses
- Education expenses
- Uniforms
- Business gifts
- Employment agency fees
- Investor expenses (safe deposit box, investment advice)
- Subscription to professional journals
- Tax preparation fees
- Debit card fees paid to pay income tax
- Engaged in for profit activities
6) Other miscellaneous deductions - No AGI limitation
- Gambling losses
- Federal estate tax paid n income in respect of descendant
What is the additional standard deduction?
The additional deduction is for people aged 65 and/or blind.
Can taxpayers married filing separately use standard deduction?
Taxpayers married filing separately can only both use standard deduction if both are NOT itemizing.
What is the standard deduction allowable to dependents?
Dependent children get a standard deduction in the amount greater of:
1) $1,050
2) Earned income + $350
- The amount is limited to regular standard deduction
Explain another way to say itemized deduction?
“from AGI”
What are the itemized deductions that are NOT subject to a phaseout?
GIMIC
All of the following are not subject to phaseout:
1) Gambling losses
2) Investment interest expense
3) Medical expenses
4) Casualty and theft loss
All other itemized deductions besides above are subject to phase out limitation.
Which individuals qualify to have payments to be made on their behalf as medical expenses for itemized deductions?
1) Filing taxpayer
2) Spouse
3) Dependent who received more than half of his or her support from the taxpayer
Define “dependent” for the purpose of medical expenses?
Under the SUPORT test for dependents:
U - Under taxable amount of income is eliminated
Define the timing of medical expenses for itemized deductions?
Medical expenses are deductible when:
- Paid
- Charged
E.g. If taxpayer pays for flu shot in Dec on credit card, but the bill comes in Jan. The taxpayer can still deduct medical expenses.
What is the formula for qualified medical expenses?
Qualified medical expense Less: insurance reimbursement = Qualified medical expense "paid" Less: 10% of AGI = Deductible medical expenses
Explain the destructibility of capital expenditures as medical expenses?
Capital expenditures can only be expensed up to the increase of the property.
E.g. Taxpayer builds a steam bath as a requirement by doctor - the steam bath is worth $10,000 and real estate agent says the amount of FMV is $7,000 of adding steam bath to home. The $7,000 is deductible.
What are the four types of taxes that can be deducted as itemized deductions? RIPS
1) Real estate taxes
2) Income tax (State and Local)
3) Property tax
4) Sales tax
Who can deduct real estate taxes as itemized deductions?
Taxpayers who are legally obligate can deduct real estate taxes.
E.g. Taxpayer pays mom’s property tax. The taxpayer cannot deduct property tax, because they are legally obligated.
What is the deduction amount for real estate taxes if taxpayer sells/purchases home?
Real estate taxes are prorated.
E.g. if taxpayer sells/purchases home on July 1st, they can only deduct 1/2 of real estate taxes.
What are two examples of nondeductible real estate taxes?
Real estate taxes do not include the following:
1) Special assessment taxes - street, sewer, and sidewalk assessment taxes
2) Taxes paid through an escrow - e.g. bank pays your property tax
