Flashcards in Ind. Inc. Tax: Itemized Deductions Deck (26):
When is the cost of surgery deductible?
When it is reconstructive, not when it is purely cosmetic.
Is mileage for healthcare deductible?
At the medical mileage rate in effect at the time.
Is nonpresciption medicine deductible?
What is the deductible amount for medical expenses?
Total medical expenses - 10% of AGI (or 7.5% of AGI for older taxpayers) = deductible amount for med. exp.
When are misc. itemized deductions allowed?
When the total of such expenses > 2% of AGI.
examples of misc. from AGI deductions
1. Tax prep. fees.
2. Job-hunting exp.
3. Fees incurred for tax litigation.
4. The cost of required bus. suits is not deductible.
benefit received rule
requires that when a taxpayer makes a contribution to a qualified charity, the deductible charitable contribution is reduced by the value of whatever is received by the taxpayer
exception to benefit received rule
1. Applies to contributions made to a college or university when the donor receives the right to purchase tickets to an athletic event.
2. In this case, 80% of payment is treated as a charitable contribution regardless of whether the tickets would be otherwise available.
Is the value of donated services or foregone income tax deductible?
No, but appropriate expenses incurred to provide these services are deductible..
Is the donation of art deductible?
1. Yes, if made to a qualified organization.
2. The donor can deduct the FV of the art but the amount will be limited to 30% of AGI unless an election is made to forgo the deduction of the appreciation. The limit would then be 50% of AGI.
Are inv. expenses deductible as a from AGI deduction?
They are available as a 2% misc. itemized deduction.
How are casualty losses handled for tax purposes?
1. Each separate casualty loss is reduced by the amount of insurance reimbursement and is then subject to a $100 floor.
2. The resulting number is aggregated (for multiple losses) which is an itemized deduction to the extent it exceeds 10% of adjusted gross income.
When are points deductible?
When they are paid to secure a home equity or home acquisition loan.
When are points deductible in the year paid?
1. If the points are on the original mortgage
2. OR, the purpose of the loan is to make improvements to the property (including a pool), the points can be deducted in the year paid.
How are points handled when not deducted in the year paid?
They are amortized and deducted over the life of the loan.
How are state inc. taxes and state sales taxes handled for fed. tax purposes?
A taxpayer can take either the amount paid as a state income tax or the amount paid as a sales tax as an itemized deduction, but not both.
Types of interest can be taken as an itemized deduction by an individual taxpayer:
1. Interest on a home acquisition loan (to buy, construct, or improve home) of up to $1 million of debt
2. Interest on a home equity loan (the house is used as security but the money is not used to buy, construct, or improve home) of up to $100,000 of debt,
3. AND interest to buy investments (but only the interest up to the amount of net investment income can be deducted).
If a long-term capital asset is donated to a qualified charity, the itemized deduction is...
based on the FV of the item.
If a short-term capital asset is donated to a qualified charity, the itemized deduction is...
The deduction is the lesser of the cost or FV of the gift.
1. Loss caused by theft, vandalism, fire, storm, or similar causes, and boat, car, and other accidents. It also includes loss caused by the insolvency or bankruptcy of a financial institution.
2. The loss is the lower of the tax basis of the property or the drop in value.
3. Each loss is then reduced by any insurance payment, the $100 floor, and 10% of AGI.
Itemized deductions subject to phase out due to high income levels include:
1. Charitable contributions.
2. Taxes paid.
3. Job expenses.
4. Other misc. deductions (except gambling losses).
5. Int. exp. (except when incurred to get inv. inc.)
Are property taxes deductible as itemized deductions?
Yes, but they can only be deducted by the person on whom the tax is assessed.
Are contributions to 501(c)(3) orgs. tax deductible?
Are contributions to 501(c)(4) orgs. tax deductible?
1. Organizations can qualify as 501(c)(3) if they have a mission that includes: religious, charitable, scientific, public safety, literary,educational, to promote the arts, or for the prevention of cruelty to children or animals.
2. All income that is earned by these organizations that is not unrelated business income is tax free.
3. Most contributions can be deducted for tax purposes by the donor.