Exam 5: Deductions for Individuals and Tax Determination

To file as a surviving spouse, a taxpayer must maintain a home for a dependent child for the entire year.

Tina is 60 and single. She has AGI of $71,000. If she paid for $9,625 in unreimbursed medical expenses, what is her medical deduction for AMTI in 2018?

John and Joanna have $125,000 in combined salary and wages, $8,000 in dividend income, and $3,000 in interest income. What is their tax liability for 2018 if they are married filing jointly and have $35,000 in itemized deductions?

Who are qualifying relatives for the dependency exemption that was allowed prior to 2018? When will this deduction be reinstated?

Emma purchased investment land in 2012 for $46,000. At the end of 2017, she was approached by the local Girl Scout organization in which she had been an active troop leader, about donating the land for a summer camp site. Emma agreed and deeded the land to the Girl Scouts for their camp in February 2018. The fair market value of the land at the end of 2017 was $55,000 and in February 2018 was $56,000. Emma's adjusted gross income was $100,000 for 2017 and $110,000 for 2018. Emma expects her AGI to decrease to $10,000 in 2019 because most of her future retirement income will be from tax-exempt sources. What is the maximum amount Emma can deduct for 2018 if this is her only itemized deduction?

All of the following are deductions for AGI except:

Holly and Ken (both age 46) are married and have two children living at home: Sara is 19 and earned $19,000 as a secretary. Claudia is 15 and is in high school. Claudia made $4,200 as a model this year, all of which was put into a trust account except for her manager's fee. Ken made $67,200 as an engineer and Holly earned $7,000 as a substitute teacher. If they have $18,000 of itemized deductions, what is Holly and Ken's tax liability on their joint return in 2018 after any allowable credits?

Which is more advantageous, a deduction for or a deduction from adjusted gross income? Why?

Lisa's husband died in 2015. Lisa did not remarry, and continued to maintain a home for herself and her dependent daughter during 2016, 2017, and 2018 providing full support for herself and her daughter during these years. For 2018, Lisa's filing status is:

Which of the following expenditures is not subject to some form of limitation on its deductibility based on AGI?

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2018 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income). They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. Sebastian and Kaitlin also paid the following amounts in 2018: -$38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995. The principal amount of the mortgage is $1,250,000. They also paid $8,250 in real estate taxes on the home. -$6,000 investment interest expense -$7,600 unreimbursed employee business expenses (none for meal or entertainment expenses) -$1,650 in state income taxes to the state of California where Sebastian worked for part of the year -$1,400 in state and local general sales taxes -$490 fee for preparation of their 2017 tax return, paid to their CPA in 2018 -$2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships. They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for its fair market value of $17,000 at its fundraising auction. What is Sebastian and Kaitlin's taxable income for 2018 if they do not itemize their deductions and file as married filing jointly?

Charles has gross income of $80,000 and is single but provides the sole support of his elderly parents, paying all their housing, food and clothing costs in 2018 What is his filing status and how much is his standard deduction?

What limits are placed on an individual's charitable contribution deduction?

How is qualified business income (QBI) defined and how is the QBI deduction calculated?

Seth and Clara have three dependent children ages 2, 6, and 10. They have AGI of $409,250 in 2018. What is their allowable child tax credit if it begins to phase out at $400,000?

What types of insurance premiums are deductible as an itemized deduction?

What is the difference in tax savings between a $1,000 tax credit and a $1,000 tax deduction for a single taxpayer with $45,000 in taxable income?

A taxpayer's standard deduction is limited by the taxpayer's AGI if AGI exceeds a certain threshold.

Stephanie and Cal have three dependent children in college. Sally is a freshman and Teri is a sophomore at a small private college in their town where their expenses are $6,500 per year for each student; Lexi is in her third year of medical school in Wisconsin and her related expenses are $12,500 per year. What is the maximum education credit allowed Stephanie and Cal on their joint tax return if their AGI is $124,000 in 2018 and the LLC phaseout range is $114,000 - $134,000?

In 2018, Carol, who is 54 and single, earned a salary of $54,000 and $6,000 of interest on State of Nevada bonds. She contributed $2,000 to her Roth IRA, paid a $12,000 hospital bill, state income taxes of $1,500, real estate taxes of $900, mortgage interest of $4,500, and $2,000 interest on her margin account under which she purchased the bonds. What is Carol's taxable income?