Deductions Flashcards
What two sets of deductions are there?
- Above the line
2. Choice of “itemized” or standard deductions
What are examples of Above the Line deductions?
Ordinary and necessary business expenses Business interest Business taxes (state/local) Depreciation (delivery truck) Alimony Moving Expenses Limited deduction for school loan interest ($2500 per year only for INTEREST, not on principle)
What is the home mortgage interest deduction rule?
Taxpayers may deduct mortgage interest on mortgages of up to 1,000,000 (in the aggregate) on a principal and a second personal residence
What about interest on a home equity loan?
Yes, can deduct up to $100,000
Can you deduct state and local govt taxes?
Yes, with the exception of sales tax
When are unreimbursed casualty losses deductible?
- If the loss is greater than $100,
- The loss is sudden and unexpected, and
- Only to the extent that losses (in the aggregate) exceed 10% of AGI!
When can you deduct unreimbursed medical expenses?
Only when they exceed 10% of your AGI
Rule for charitable contributions?
Taxpayers may deduct the fair market value of property and the amount of cash contributed to qualified charities.
As a premium for your $1000 donation to the American Heart Assoc., you receive a fancy dinner worth $250. What is deductible?
Only $750
How much can you deduct for misc. deductions?
Taxpayers may deduct eligible misc. deductions to the extent that (in the aggregate) they EXCEED 2% of AGI
When are legal fees deductible?
When they are for business or investment settings,
When they are attributable to tax advice in divorce proceedings
The recipient spouse may deduct legal fees necessary in generating taxable alimony
When are legal fees NOT deductible
For personal expenses, including divorce proceedings generally.
When are investment fees and expenses deductible?
Generally yes when they are necessary to generate taxable income. broker fees, settlement expenses in a successful lottery dispute, etc.
What is the rule for personal exemptions?
taxpayers are entitled to one exemption for themselves and one for each dependent. Available to everyone
Who gets the exemption after a divorce?
Unless the other parents signs a written release, the general rule after a divorce is that the custodial parent gets the exemption for children of the marriage.
