Taxation Chapter 7: FROM AGI Deductions

Medical expenses

- Can deduct medical expenses used to treat themselves, their spouse, or dependents.
- Qualifying medical expenses: unreimbursed payments for: care, prevention, diganosis or cure of disease, injury, or bodily funciton (this includes medications, medical a

Taxes

- Deduction for taxes is limited to 10,000 or 5,000 married filing jointly.
- Taxes included: Income (state, local, and foreign income), real estate on personal or investment property, personal property taxes that are ascessed on the value of the property

Interest

1. Interest on loans used to aquire investment assets like stocks, bonds, and land. Limited to the investor's net investment income. Any extra is carried foward to the subsquent year
2. Home mortage interest: As long as home is held as collateral, Interes

Charitable Contributions

Must be made to a qualified charity (engages in religous, educaitonal, scientifc, or other public activies; not a political campaign). Cash and cash equivalents are deductible in the year paid; also deduct travel at 14 cents per mile if they drove their o

Example of medical contributions deduction limit: This year Mrs.Pate incurred $2,400 in unreimbursed qualified medical expenses. Given that her AGI is 187,000, how much of these medical expenses can she include in her itimized deductions?

0.075 X 187,000=14,025. 2,400-14,025= -11,625. So none are included

Interest deduction example: Papa Ernest acquired his home this year for $300,000. He purchased it by paying 40,000 as a down payment and borrowing 260,000 from a credit union. His home is the collateral for the loan. During the year, he paid 15,800 in int

All 15,800

Limitations to charitable deductions

Amount of charitable contribution deduction is limited to a ceiling, which depends upon the type of property donated and the nature of the chairity. Cash donations to public chairites and private operating foundations are limited to 60% of the taxpayer's

Example of limitations to charitable contributions: Red cross 1,700 cash (60% limitaiotn), 70 cash milage (60% limitation), 160 ordinary income property (50% limitation), 10,600 capital gain property (30% limitation): total contributions are $12,530...how

1. 0,6X187,000=112,200. So all 1,770.
2. 0.5 X 187,000-1,770=91,730. So all 160.
3. 0.3 X 187,00=56,100. OR 0.5 X 187,000=93,500 -160-1,770=91,570. So all 10,600

Miscellaneous

- Gambling losses and expenses to the extent of gambling income
- Casualty and theft losses(sudden, unexpected, unsual event) on investment property
- Losses on personal use asset in federally declared disaster up to a 100 floor
- Unrecoverd cost of annui

Standard deduction

Bunching two years worth of itemized deductions to exceed the standard deduction.

Deduction for Qualified Business Income

FROM AGi deduction in place of itemized or standard deduciton. QBI includes income fro taxpayers that have sole proprietorships, partnership income, and S corporation income. In general, the deducton is lesser of 20% of QBI 20% of the excess of taxable in

Chapter 6 Example: This year Jack intends to file a married-joint return. Jack recieved 167,500 of salary, and paid 5,000 of interest on loans used to pay tuition for his dependent daughter, Deb. This year he also paid moving expenses of 4,300 and 28,300

Student Loan interest deductible up to 2,500, subject to a phase-out for taxpayers with MAGI over 65K for single. 135 for Married filing joint.
A) AGI: 167,500-28,300=139,200 MGI; 5,500-2,500=3,000. 139,200-135,000/30,000=0.14 phase out X 2500=350 exclude

Simpson, age 45, is a single individual who is employed full time by Duff corp. This year he reports AGI of 50,000 and has incurred the following medical expenses: dntist charges of 900, docor charges of 1,800, optical charges of 500, cost of eyeglasses o

- Deduct everything exepct the over the counter drugs.
- Now the doctor's charges and hostpital costs aren't included.

Article: Tax implications for Bitcoin

IRS started taxing it like any other capital gain. Other countries like UK and Japan have updated their tax laws for it as well.

INCOMPLETE: Penny, a full-time scientist, loves stock car racing. To feed her passion, she bought a used dirt-track car and has started entering races. She reported the following income and expenses:

Expenses for this are not deductible at all since its a hobby. So all 2,500 income

...

INCLUDED in itemized deductions: 1,500 county real estate + school district tax on land.

Minimal: Rental use of home: minimal of 14 days or fewer of neutral income. If you rent it for 15 days, then its reported.
- Significant rental use is 15 days or more
- Nonresidence: rent all the time and dont spend alot of tiem thre
2. Interest on studet

...

Chapter 6: Kenneth lives in his home for the entire year expect when he rented his home to a married couple for 14 days in December. The couple paid him 14,999 in rent for the two weeks. He incurred 1,000 in expenses realting to the home for the 14 dyas.

He excludes the rental receipts and he would not deduct the rental expenses.

Chapter 6: REntal real estate exception favors

Lower and middle income taxpayers.

This year, Norma, a single taxpayer, paid 11,200 of real estate on her personal residence and 9.500 of state income taxes. Which are FOR AGI deductions?

Both are FOR AGI deductions, but only 10,000 worth can be deducted.

Larry recorded the following donations this year:
500 cash to a fmaily in need
2,4000 to church
500 in cash to political cmapiagn
To salvation army items that originally costs 1,200 but are worth 300.
What is maximum allowable chairitbale contribution if

2,700.

Which of the following costs are NOT deductible as an itemized medical expense? Paymetns to hostipal, trnasportation for medical purposes, cost of insruance for long-term care services.

All are deductible. NOT over counter drugs, cane you bought after you decided you need one. Cosmetic surgires have to have doctor's stamp of approval

Opal fell on the ice and injured her hip this winter. As a result, she oaid 3,000 for a visit to the hostpital emergency room and 750 for follow-up visits with her doctor. While she recuperatd, she paid 500 for perscription medicene and 600 for a threapis

4850 toal -1200 reimbursement

Glenn races stock cars for a hobby. He was paid a salary of 80,000 and won 2,000 in various races. What is his taxable income if eh incurred 4,200 of hobby expenses.

Increases income 2,000.

Daquan, a single taxpayer, is an attorney and practices as a sole proprietor. This year, he had net business income of 90,000 from his law practice. Assume that he pays 40,000 in wages to his employees. He has 10,000 of property (unadjusted basis of equip

90,000 net business income, 40,000 w-2 wages, 10,000 property, 100,000 taxable income. Net business income is 90,000 and he can potentially take 20% (18,000)...this amount cannot exceed 50% of W-2 wages (20,000) or 25% of W-2 + 2.5% of property (10,000 +2

Katie, a single taxpayer, is a shareholder in Engineers One, a civil enginnering company. This year, Katie's shares of net business income from Enginners One is 200,000. Assume that Katie's allocation of wages paid by Enginners One to its employees is 300

Net business income 200,000. 300,000 W-2 wages, 150,000 property, 400,000 taxable income. Net business income is 200,000 and she can potentially take 20%(40,000)...cannot exceed 50% of W-2 wages 150,000 or 25% of W-2 + 2.5% of property 78,750. Cannot exce

Felipe a single taxpayer is a technology consultant who operates as a sole proprietorship. His net business income is 600,000 and he pays wages of 100,000 to his employees, and he has 200,000 of qualified property (unadjusted bais). Felipe's taxaable inco

He gets 0 QBI because he's a consultant and his income is to high for the expceiton.