Section 3: Deductions & Credits: 12: Standard & Itemized Deductions

Question 1

MUST itemize. No standard deduction

Answer 1

MFS - if one itemizes, the other partner MUST itemize. or both take standard deduction
NonResident Alien
Short Tax Year (taxpayer changes accounting methods halfway thru the year) very rare

Question 2

Itemized deductions are reported on

Answer 2

Sch A on 1040

Question 3

Itemized deductions; Qualifying Medical expense

Answer 3

NOT like an HSA

Cannot do vitamins, gym memberships, spas, maternity clothes (BUT breast pumps are deductible) etc
Cannot do childcare expenses for normal healthy baby
Controlled substances
Cosmetic surgery unless directly related to a disease
Swim/dance lessons
FSA/HSA/MSA
Funeral expenses
Except for insulin, no non-prescription medicines

Needs to prevent or alleviate a medical issue

Capital improvements are deductible, whether you own or not. Such as installing a wheelchair ramp.
Stop-smoking programs, but NOT nicotine patches/gum.

Question 4

Can only deduct out of pocket medical expenses if it is >___% of AGI

Answer 4

7.5% of AGI. You can deduct the amount that EXCEEDS the 7.5% of your AGI.

Question 5

Itemized Deductions for Child of Divorced Parents

Answer 5

The parent who PAID for the expense can deduct the expenses, no matter who claims the child as a dependent

Question 6

Sch A on 1040: Home Mortgage Interest Deduction

Answer 6

Includes:
Mortgage interest
Late fees for mortgage
Points on mortgage
Investment int expense

Limit for mortgage interest:
Mortgage started After Dec 15th, 2017: $750 total mortgage loan amount ($375 MFS)
Dec 15th 2017 or before: $1M

Can only be for primary residence plus one more home

Question 7

Charitable Deductions:

The 60% limit
* The 50% limit
* The 30% limit
* The 20% limit

Answer 7

Charitable Deductions:

The 60% limit: In 2023, a 60%-of-AGI limit applies to cash contributions to a public charity,
specifically, 501(c)(3) organizations. These are called “qualified cash contributions.”
Contributions of noncash property do not qualify for this limit.
* The 50% limit: This limit applies to most noncash contributions to public charities. Examples
of noncash contributions include furniture, clothing, and housewares. This limit also applies to
gifts of inventory and depreciable property, such as machinery and vehicles. This limit also
applies to most conservation easements.
* The 30% limit: This limit applies to donations of most appreciated capital gain property
(property that would have resulted in a long-term capital gain if sold instead of donated) where the donor can claim the FMV as a deduction. Common examples include stock, cryptocurrency,
land, or other real estate that has appreciated in value.
* The 20% limit: This limit applies specifically to gifts of appreciated capital gain property to
most private nonoperating foundations and certain other non-public charities.

Question 8

Alice earns $55,000 during the year, and paid her boyfriend’s $6,000 hospital bill. Alice’s boyfriend lives with her but is not her dependent because he earns $9,700 in wages working as a cashier and does not meet the gross income test to be claimed as a qualifying relative. Her boyfriend is also permanently disabled, but he does provide more than one-half of his own support with the wages that he earns. Based on this information, which of the following statements is true?

A. Alice can deduct the hospital bill as a medical expense on her return.
B. Alice cannot deduct the hospital bill as a medical expense on her return.
C. Alice can deduct the hospital bill as a medical expense on her return, and she can claim her boyfriend as a dependent because he earns less than the standard deduction amount.
D. Alice can deduct the hospital bill as a medical expense on her return, and she can claim her boyfriend as a dependent because he is disabled.

Answer 8

Correct Answer Explanation for B:

Alice cannot deduct the hospital bill as a medical expense on her return. Her boyfriend is not a dependent or a family member, and because of this, his disability is irrelevant. The payment would be considered a gift. However, if they were to get married, then the medical expense could potentially be deducted on their joint return.

Question 9

Question ID: 98939131 (Topic: Deductible Taxes)
Can a taxpayer deduct both sales taxes and state and local income taxes?

A. Yes, as long as the total deduction does not exceed $10,000.
B. Yes, but only if the taxpayer takes the standard deduction.
C. No, only one of these taxes can be deducted.
D. Yes, regardless of the total deduction amount.

Answer 9

Correct Answer Explanation for C:

Only one of these taxes can be deducted. Taxpayers can choose to deduct either sales/use taxes or state and local income taxes, but not both.

Question 10

Question ID: 98939136 (Topic: Deductible Taxes)
Which of the following is NOT deductible as a state and local tax on Schedule A?

A. Local assessments for street improvements, sidewalks, or sewer lines
B. Sales taxes on purchases
C. Personal property taxes on a boat
D. Real estate taxes on a main home

Answer 10

Correct Answer Explanation for A:

Taxpayers can deduct certain taxes if they itemize deductions. In order to be deductible, a tax must have been imposed on the taxpayer and paid by the taxpayer during the tax year. Deductible taxes include:

State, local, and foreign income taxes,
State and local sales taxes,
Real estate taxes (but not for foreign real estate),
Personal property taxes (such as the portion of DMV fees based on the value of the car, boat, motorcycle, etc.).
Some real estate taxes are not deductible, including taxes imposed to finance improvements of property, such as assessments for streets, sidewalks, and sewer lines. In addition, itemized charges for services and homeowner’s association fees are not deductible.

Note: The Tax Cuts and Jobs Act instituted a temporary cap on state and local taxes (also called the SALT cap). This deduction is capped at $10,000 (there is a reduced $5,000 limit for MFS filers) until 2025.

Question 11

Question ID: 94815855 (Topic: Deductible Taxes)
When are property taxes paid on a primary residence deductible?

A. In the year they are incurred.
B. In the year they are assessed.
C. In the year they are assessed and paid.
D. In the year they are billed.

Answer 11

Correct Answer Explanation for C:

Property taxes paid on a primary residence are deductible in the year they are assessed and paid. But limits apply. Due to the Tax Cuts and Jobs Act, the total amount of deductible state and local income taxes, including property taxes, is capped at $10,000 per year (also called the “SALT CAP”).

Question 12

Question ID: 98939133 (Topic: Deductible Taxes)
Danika makes the following payments during the year:

State income tax: $8,000
Real estate taxes on her main home: $900
Local benefit tax for maintaining the sewer system: $475
Annual homeowner’s association fees: $1,550
She plans to itemize her deductions. What is her allowable deduction for state and local taxes on Schedule A?

A. $8,900
B. $8,000
C. $9,375
D. $10,925

Answer 12

Correct Answer Explanation for A:

Her total deductible taxes on Schedule A are $8,900 ($8,000 + $900 = $8,900). The local benefit tax and the homeowner’s association fees are not deductible.

Taxpayers can deduct certain taxes if they itemize deductions. In order to be deductible, a tax must have been imposed on the taxpayer and paid by the taxpayer during the tax year. Deductible taxes include:

State, local, and foreign income taxes,
State and local sales taxes,
Real estate taxes (but not for foreign real estate),
Personal property taxes (such as the portion of DMV fees based on the value of the car).
The Tax Cuts and Jobs Act instituted a temporary cap on state and local taxes (also called the SALT cap). This deduction is capped at $10,000 ($5,000 for MFS filers) until 2025.

Question 13

Question ID: 94849576 (Topic: Interest Expense)

Jenny is liable for multiple loans on which she pays interest. How much of the following interest expense is deductible on Jenny’s Schedule A, before any income limitations?

$1,200 interest paid on a loan used to purchase taxable investments.
$750 interest paid on a qualifying student loan.
$2,700 credit card interest on an advance used to make a down payment on a new home.
$625 interest on a loan used to invest in tax-free municipal bonds

Jenny is reporting $1,500 in investment income this year.

A. $1,200 =
B. $0, investment interest is not deductible.
C. $3,900
D.  $1,950

Answer 13

Correct Answer Explanation for A:

Only the $1,200 interest paid on a loan used to purchase taxable investments would be deductible. All of the other items listed would not be deductible on Schedule A as investment interest. The student loan interest may be deductible, but not on Schedule A. Instead, it would be an adjustment to income on her Form 1040.

Note: Investment interest is paid on a loan that was used to purchase an investment property or other dividends, interest, royalties, or annuities. The deduction for investment interest expense is limited to a taxpayer’s net investment income. Since she had investment income, she is permitted to deduct her investment interest expense.

Question 14

Question ID: 94849912 (Topic: Interest Expense)

Brandy has $4,000 of investment income in the current year. She also earned $50,000 in wages. She has the following interest expense:

Interest paid on a margin loan used to purchase stocks: $1,500.
Credit card interest: $850.
Interest incurred on an auto loan for her personal vehicle: $3,000
Interest on a loan used to invest in tax-exempt muni-bonds: $475.

What amount of this interest expense can she deduct on Schedule A?

A. $4,000
B. $1,975
C. $0, investment interest is not deductible. 
D. $1,500

Answer 14

Correct Answer Explanation for D:

She can deduct $1,500 as investment interest expense. Investment interest is interest paid or incurred on debt to purchase taxable investments. It is deductible on Schedule A but is limited to the amount of a taxpayer’s net investment income for the year. However, no deduction is permitted for interest on debt incurred to purchase tax-exempt muni-bonds. Credit card interest and the interest paid on her personal auto loan are not deductible.

Question 15

Question ID: 94849893 (Topic: Interest Expense)

Sarah and Emmitt are married and file jointly. Sarah earns $13,000 in wages working as a cashier. Emmitt earns $60,000 in wages working as a salesman. Neither is self-employed. They are itemizing the following Schedule A expenses on their current year tax return:

Emmitt’s employee-related business expenses: $6,000.
Mortgage interest paid: $7,000 (all acquisition debt, mortgage loan amount is $375,000).
Real estate taxes on a primary residence: $3,000.
State income taxes: $13,000.
Gambling winnings: $1,000.
Gambling losses: ($8,000).

What is the total amount of itemized deductions that they can deduct on their Schedule A?

A. $18,000
B. $30,150
C. $23,300
D. $24,150

Answer 15

Correct Answer Explanation for A:

Only the mortgage interest is fully deductible. The real estate taxes and state taxes are subject to a $10,000 cap (also called the “SALT CAP”). The gambling losses are only deductible to the extent of gambling winnings. Thus, the answer is calculated as follows: $7,000 mortgage interest paid + $10,000 SALT CAP [$3,000 real estate taxes + $7,000 state income taxes (capped)]+ $1,000 allowable gambling losses = $18,000.

Under the Tax Cuts and Jobs Act, most employee business expenses are no longer deductible on Schedule A (with the exception of work-related expenses of an Armed Forces reservist, qualified performing artist, fee-basis state or local government official, or employee with impairment-related work expenses.)

Question 16

Question ID: 94849940 (Topic: Interest Expense)

Ginny is unmarried and has one dependent parent. She plans to file as Head of Household. Her AGI is $99,000. During the year, she paid the following interest expenses:

$24,000 in home mortgage interest on her primary residence.
$8,200 in interest on a second house, where her mother lives, and whom Ginny claims as a dependent. 
$15 in late fees for paying her own home mortgage late.
$2,500 in student loan interest.
$3,000 of investment interest expense. They have $1,000 of net investment income.
$1,010 in credit card interest, which was used for medical expenses

Ginny plans to itemize her deductions. Based on these figures, what is the amount of deductible interest that she can claim on her Schedule A?

A. $33,215 
B. $32,215
C. $24,015
D. $24,000

Answer 16

Correct Answer Explanation for A:

Ginny can deduct $33,215 in total interest on Schedule A. The answer is figured as follows:

She can deduct $32,215 in mortgage interest ($24,000 + $8,200 + $15 in late fees). She can deduct interest on up to two personal homes. 
She can also deduct $1,000 in investment interest expense (she incurred $3,000 of investment interest expense but only has $1,000 of net investment income, so her deduction for interest expense is limited to $1,000. The excess can be carried over to succeeding tax years).

The credit card interest is treated as personal interest and is not deductible. The student loan interest would be deductible, but not on Schedule A. Student loan interest is deducted as an adjustment to Income on Form 1040. For more information on deductible interest expenses, see Topic 505, Interest Expense.

Question 17

Question ID: 94849597 (Topic: Interest Expense)

Brett borrowed $550,000 from a bank to purchase a rental property on Jan 1. He immediately finds a tenant and the house was rented for the entire year. He paid $11,000 of interest on the mortgage for the rental property, and an additional $13,000 in property taxes during the year. He is not a real estate professional. How much of the expenses can he deduct, and where should he deduct them?

A. The mortgage interest and property taxes are deductible on Schedule C.
B. All of the mortgage interest and up to $10,000 of the property taxes are deductible on Schedule A.
C. All of the mortgage interest and property taxes are deductible on Schedule E.
D. All of the mortgage interest and property taxes are deductible on Schedule A.

Answer 17

Correct Answer Explanation for C:

Since it is a rental property, and not a personal residence, all of the mortgage interest and property taxes are deductible on Schedule E.

Question 18

Question ID: 94849990 (Topic: Interest Expense)

During the year, Roland paid the following expenses:

Home mortgage interest: $4,180.
Credit card interest: $1,400.
Appraisal fee for his personal residence: $500.
Interest on a car loan: $2,000.
Late payment fees on his mortgage loan: $120.

What amount can Roland deduct on Schedule A?

A. $5,800
B. $4,300
C. $4,800
D. $4,180

Answer 18

Correct Answer Explanation for B:

Roland can deduct a total of $4,300 as mortgage interest. The home mortgage interest ($4,180) is deductible. The late fees paid on a mortgage loan ($120) can also be deducted as mortgage interest. All the other charges are considered personal expenses and are not deductible.

Question 19

Question ID: 94849960 (Topic: Charitable Contributions)

Barnes pays $300 a year for membership in a university’s athletic scholarship program, which is a qualified charitable organization. The only benefit of membership is that he has the right to buy one season ticket for a seat in a designated area of the stadium at the university’s home football games. He doesn’t actually purchase any football tickets or go to any games. How much of this is a qualified charitable contribution?

A. He can only deduct 50% as a charitable contribution ($150).
B. He can deduct $300 as a charitable contribution.
C. He can deduct $240 (80% of $300) as a charitable contribution.
D. He cannot deduct a charitable contribution.

Answer 19

Correct Answer Explanation for D:

Because of the Tax Cuts and Jobs Act, no deduction is allowed for any amount paid for the right to purchase tickets for seating at an athletic event in a college athletic stadium. This is considered a “quid pro quo” contribution. A quid pro quo contribution is a charitable donation for which the donor receives something from the recipient in exchange for their funds. The fact that Barnes didn’t take advantage of the perk and purchase any football tickets is irrelevant. For more information, see Publication 526, Charitable Contributions.

Question 20

Question ID: 94849854 (Topic: Charitable Contributions)

Colby donates an expensive oil painting to a qualified charity. He plans to deduct $8,000 for the donation, which is the painting’s FMV. What does the IRS require in order for Colby to substantiate the painting’s value?

A. Obtain a receipt and a written statement of value from the charity.
B. Obtain a receipt from the charity.
C. Hire a qualified appraiser to make a written appraisal of the painting.
D. Hire a qualified appraiser to make a written appraisal of the painting. Colby must attach a copy of the appraisal to his tax return.

Answer 20

Correct Answer Explanation for C:

Colby must hire a qualified appraiser to make a written appraisal of the painting. If any single donation or a group of similar items is valued at over $5,000, a qualified appraiser is required to make a written appraisal of the donated property. The taxpayer must also complete Form 8283, Noncash Charitable Contributions, Section B, and attach it to his tax return. He generally does not have to attach the appraisal itself, but must retain a copy for his records.

Note: For large donations of artwork valued at more than $20,000, or other property valued at more than $500,000, the appraisal itself must be included with the tax return.

Question 21

Question ID: 94849848 (Topic: Charitable Contributions)

Which of the following is a qualified charitable deduction?

A. Direct contributions to a teenage runaway.
B. Out-of-pocket travel expenses for a volunteer to attend a church fundraiser.
C. The cost of a raffle ticket at a church fundraiser.
D. The fair market value of blood donated to the American Red Cross.

Answer 21

Correct Answer Explanation for B:

For charity volunteers, transportation expenses can be deductible as an itemized deduction on Schedule A. Expenses include bus fare, parking fees, tolls, and either the cost of gas and oil or a standard mileage deduction for charitable activities. Raffle tickets (or any type of gambling expense) are never deductible as a charitable contribution, even if the event directly benefits a charity. Blood donations are not deductible, but the cost of travel to make a blood donation is a deductible expense. A taxpayer cannot deduct a donation that is made directly to a needy individual.

Question 22

Question ID: 94849832 (Topic: Charitable Contributions)

Michael makes several charitable donations during the year. Which of the following donations does NOT meet the IRS’s recordkeeping requirements?

A. A $240 donation to an animal shelter. Michael has a canceled check for the donation, but no receipt.
B. A $600 donation of a car to a local charity. Michael has a Form 1098-C for the donation.
C. A $100 donation of clothing to Goodwill. Michael has a receipt for the donation.
D. A $300 donation to a local church. Michael has a canceled check for the donation but no receipt.

Answer 22

Correct Answer Explanation for D:

The $300 donation to his local church does not meet all the substantiation requirements. Michael has a canceled check for the donation, but no receipt, and the donation amount is OVER $250.

For any single contribution of $250 or more (including contributions of cash or property), a canceled check or receipt alone is insufficient. The taxpayer must also obtain and keep in his records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services.

Question 23

Question ID: 94849964 (Topic: Charitable Contributions)

Jimmy paid $65 for a ticket to enter a charity fun run at his local church. His entire $65 entry fee goes to the church. Jimmy also gets a t-shirt for participating in the fun run. The shirt has a fair market value of $15. Jimmy participates in the fun run and has a good time. What amount of his charitable gift is deductible on Schedule A?

A. $50
B. $15
C. $0
D. $65

Answer 23

Correct Answer Explanation for A:

Jimmy’s donation is limited to $50. To figure the amount of his charitable contribution, subtract the value of the benefit he received ($15 t-shirt) from his total payment ($65). He can deduct $50 as a charitable contribution to the church. For more information and similar examples, see Publication 526, Charitable Contributions.

Question 24

Question ID: 94851038 (Topic: Charitable Contributions)

What documentation is required for a cash donation of less than $250 to a qualified charity?

A. No documentation is required if the amount is less than $250.
B. A receipt (or letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution.
C. A canceled check, bank or credit union statement, or credit card statement that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution.
D. A canceled check, bank or credit union statement, credit card statement, or a receipt that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution.

Answer 24

Correct Answer Explanation for D:

When making cash gifts of less than $250, the taxpayer may substantiate the deduction using a canceled check, credit card statement or a simple receipt from the charity. A receipt from the charity is also acceptable. Cash gifts of more than $250 require a note from the charity that shows the amount, date and name of the donor.

Question 25

Question ID: 94849965 (Topic: Charitable Contributions)

Penny donates her used car to her local animal shelter, a qualifying organization. She bought it a few years ago for $19,000. A used car guide shows the fair market value for her car is currently $4,100. A few months later, Penny gets a Form 1098-C from the organization showing the car was sold for $3,900. She did not obtain any type of formal appraisal for the car. Penny plans to itemize her deductions. What is the amount that she can deduct on Schedule A for her donation?

A. $500
B. $4,100
C. $3,900
D. $19,000 (her basis in the vehicle) .

Answer 25

Correct Answer Explanation for C:

She can deduct $3,900 for her donation. She must attach Form 1098-C that she received from the charity and Form 8283, Noncash Charitable Contributions, to her return. This question is based directly on an example in Publication 526, Charitable Contributions.

Question 26

Question ID: 94849897 (Topic: Charitable Contributions)

Which of the following charitable gifts would be deductible on Schedule A?

A. The cost of raffle tickets at a church charity event.
B. A donation to a political party. 
C. A donation to a nonprofit social club. 
D. Out-of-pocket expenses when a taxpayer serves a 501(C)3 organization as a volunteer

Answer 26

Correct Answer Explanation for D:

Out-of-pocket expenses when a taxpayer serves a 501(C)3 organization as a volunteer would be deductible. The following donations would not be deductible as charitable gifts, even if made to a qualifying charity.

Donations to Civic leagues, social and sports clubs, labor unions, and chambers of commerce
Gifts to foreign organizations (except certain Canadian, Israeli, and Mexican charities)
Groups that are run for personal profit
Political groups or groups whose purpose is to lobby for law changes
Cost of raffle, bingo, or lottery tickets
Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups
Value of your time or services
Value of blood given to a blood bank.

See Publication 526, Charitable Contributions for more information.

Question 27

Question ID: 94849881 (Topic: Charitable Contributions)

Deandre donated to his church several times during the year. Which of the following charitable gifts does not meet IRS recordkeeping requirements and would not be deductible?

A. A $340 donation made in cash. Deandre has a contemporaneous receipt from the church.
B. A single contribution of land worth $5,200. Deandre has a contemporaneous receipt from the church, but no qualified appraisal.
C. Charitable mileage totaling $175 that was incurred while Deandre was volunteering. Deandre does not have a receipt, but he has a written mileage log.
D. A $195 donation made with a check. Deandre has a copy of the canceled check, but no receipt from the church.

Answer 27

Correct Answer Explanation for B:

The gift of land does not meet the IRS’s recordkeeping requirements for charitable gifts. All noncash property with a value of over $5,000 must have a qualified appraisal on its value to be deductible (an exception exists for publicly traded stock).

Question 28

Question ID: 95003080 (Topic: Personal Casualty and Theft Losses)

Brandon’s main home was located in the Gulf Coast and was completely destroyed by a hurricane in 2023. His entire county was later designated a federally declared disaster area. Brandon’s insurance did not cover very much, and he wants to claim a casualty deduction for the losses he incurred from the disaster. How must he claim this loss?

A. He can claim the losses on his return using Form 4684.
B. He can claim the losses on Schedule C. 
C. He can claim the losses on Form 4797. 
D. He can claim the losses on Schedule A, as a miscellaneous deduction.

Answer 28

Correct Answer Explanation for A:

Brandon must use Form 4684, Casualties and Thefts, to report his losses from the casualty. A deductible casualty loss is an individual’s casualty or theft loss of personal-use property that is attributable to a federally declared disaster. He can deduct casualty losses in one of two ways:

On the tax return in the year the disaster happened, or
File an amended return to deduct the loss in the year prior to the disaster

Question 29

Question ID: 94849973 (Topic: Other Itemized Deductions)

Harinder is a self-employed therapist who sees clients in his home. He has a qualified home office. This year, he decides to use the simplified method to calculate his home office expenses. His home office is 210 square feet. What is the maximum amount that he is allowed to deduct?

A. A deduction of $1 per square foot, with a maximum allowable square footage of 400 square feet, for a maximum deduction of $400.
B. A deduction of $5 per square foot, with a maximum allowable square footage of 350 square feet, for a maximum deduction of $1,750.
C. A deduction of $1 per square foot, with a maximum allowable square footage of 210 square feet, for a maximum deduction of $210.
D. A deduction of $5 per square foot, with a maximum allowable square footage of 210 square feet, for a maximum deduction of $1,050.

Answer 29

Correct Answer Explanation for D:

Using the simplified method, he would be allowed a deduction of $5 per square foot, with his office’s square footage of 210 square feet, for a maximum deduction of $1,050.

Highlights of the simplified home office deduction:

Standard deduction of $5 per square foot of home used for business (maximum 300 square feet).
Allowable home-related itemized deductions claimed in full on Schedule A. (For example: Mortgage interest, real estate taxes).
No home depreciation deduction or later recapture of depreciation for the years the simplified option is used.

Learn more about the Simplified Home Office Deduction

Question 30

Question ID: 94849927 (Topic: Other Itemized Deductions)

Galilea is employed as a full-time saleswoman and travels occasionally on behalf of her employer. Her employer does not have a reimbursement policy. Her adjusted gross income in the current year is $80,000. She has the following miscellaneous expenses, including business expenses for which she was not reimbursed:

Meals with clients: $500.
Home office expenses: $1,100.
Personal tax return preparation: $200.
Gambling losses: $9,000.

Galilea had $2,000 of gambling winnings during the year. Based on the information above, what is her allowable deduction for miscellaneous itemized deductions on her Schedule A?

A. $2,000
B. $1,100
C. $9,000
D. $2,600

Answer 30

Correct Answer Explanation for A:

Of Galilea’s deductions, only gambling losses are deductible, and then, the deduction is limited to the amount of her gambling winnings ($2,000). None of her work-related expenses would be deductible.

Note: The Tax Cuts and Jobs Act suspended a large number of miscellaneous deductions lumped together in a category called “miscellaneous itemized deductions” that were deductible to the extent they exceeded 2% of a taxpayer’s AGI. One of these was the deduction for employee business expenses (for most employees, although there are some narrow exceptions). Some miscellaneous itemized deductions are still allowable, however, including the deduction for gambling losses (but only to the extent of gambling winnings).

Question 31

Question ID: 94849914 (Topic: Other Itemized Deductions)

Caden is single. He plans to itemize his deductions this tax year. The following is a list of his expenses:

Property tax paid on his main home: $4,550.
State income taxes: $530.
Cash gifts to his church: $3,800.
Homeowner's association dues on his personal residence: $1,260.
Mortgage interest paid on his main home: $12,670.
Property tax paid on a rental home he owns: $5,200

Based on the information provided above, what is the amount of Caden’s allowable itemized deductions on Schedule A?

A. $22,810
B. $21,550
C. $21,020
D. $28,010

Answer 31

Correct Answer Explanation for B:

The amounts paid for the homeowner’s association dues are not a tax-deductible expense. The property tax paid on the rental home is deductible, but it would be reported on Schedule E as a rental expense, not Schedule A. The state income taxes are also deductible.

The calculation is as follows:
Property tax paid on his main home: $4,550
+ State income taxes: $530
+Cash gifts to his church: $3,800
+Mortgage interest paid on his main home: $12,670
=Amounts deductible on Schedule A: $21,550

Question 32

Question ID: 94849833 (Topic: Other Itemized Deductions)

Caesar itemizes deductions. The California Department of Motor Vehicles sent him an annual vehicle registration renewal notice for his car that had the following fees:

License fee: $124 (based on the value of the vehicle).
Weight fee: $65 (based on the weight of the vehicle).
Smog abatement fee: $20.

What portion of the DMV fees is Caesar allowed to deduct on his Schedule A?

A. $209
B. $65
C. $124
D. $189

Answer 32

Correct Answer Explanation for C:

Caesar can deduct the portion of the registration fee that is based on the value of his vehicle, $124. Personal property taxes are deductible if they are:

Charged on personal property, including cars, boats, or items used in a business such as equipment and furniture;
Based on the value of the property; and
Charged on a yearly basis, even if collected more or less frequently than once a year.