Exam 5: Deductions for and From AGI

Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2019, assuming they earn $50,000 in total and are not covered by pension plans?

What is the amount of the deductible HSA for each of the following taxpayers? a. Amelia and Albert, both age 43, have a qualifying high-deductible insurance plan. They contribute $5,700 to a family HSA. b. Betsy, who is single, 72 years old and covered by Medicare, wants to contribute the maximum amount to an HSA. c. Carlo has health insurance through his employer which has low deductible amounts. He is 34 years old and is married. Carlo wants to contribute the maximum to an HSA. d. Diane is 57 years old. She has a qualifying high-deductible insurance plan. She has contributed $5,350 to her HSA.

Glenda heard from a friend that prescription drugs were considerably cheaper overseas and purchases her regular prescription over the Internet from a foreign company for $500. Though technically illegal, Glenda saves quite a bit and is pretty sure "everyone is doing it." Glenda can include the $500 cost of the prescription as a deductible medical expense.

For the current tax year, David, a married taxpayer filing a joint return, reported the following: Investment income from interest \2 4,000 Investment expenses other than interest \3 ,000 Interest expense on funds borrowed 10 years ago to purchase investment property \7 0,000 What is the maximum amount that David can deduct in the current year as investment interest expense?

The amount of a special assessment charged to residents for the installation of sidewalks on their street is not deductible on Schedule A as property taxes.

During 2019, Cary and Bill incurred acquisition debt on their residence of $1,300,000. They also borrowed $200,000 on a home equity line to pay college tuitions for their children. On a joint tax return, what is the amount of their qualified acquisition debt?

The 2019 standard mileage rate for taxpayer use of a personal auto for transportation for medical care is $.19 per mile.

Debbie is 63 years old and retired in 2017. She receives Social Security payments of $12,000 a year and interest income of $30,000. She wishes to put the maximum allowed into an IRA. How much can she contribute to her IRA?

John is a single 40-year-old landscape architect earning $125,000 a year and is not covered by a pension plan at work. How much can he put into a Traditional IRA in 2019?

The investment interest expense deduction is limited to the taxpayer's net investment income.

Newt is a single taxpayer living in Hollywood, California, with adjusted gross income for the 2019 tax year of $43,050. Newt's employer withheld $3,700 in state income tax from his salary. In April of 2019, he paid $300 in additional state taxes for his prior year's return. The real estate taxes on his home are $1,800 for 2019 and his personal property tax based on the value of his automobile is $75. Also, he paid $210 for state gasoline taxes for the year. The IRS estimate of general sales tax for Newt is $1,250 for 2019. ? How much should Newt deduct on Schedule A of Form 1040 of his 2019 tax return for taxes paid?

Which one of the following is not tax deductible?

Which of the following statements is true about health savings accounts (HSAs)?

Margo has $2,200 withheld from her wages for state income taxes during 2019. In March of 2019, she paid $400 in additional taxes for her 2018 state tax return. Her state income tax liability for 2019 is $2,700 and she pays the additional $500 when she files her 2019 state tax return in April of 2020. What amount should Margo deduct as an itemized deduction for state income taxes on her 2019 federal income tax return, assuming she deducts state and local income taxes?

Under the SEP plan provisions, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is $20,000 are limited to:

Self-employed taxpayers can deduct the cost of uniforms, but not employees.

Unreimbursed qualifying moving expenses are an itemized deduction for 2019.

Harvey itemized deductions on his 2018 income tax return and was able to deduct all state and local income taxes paid. Harvey plans to itemize deductions again in 2019 and the following information is available regarding state and local income taxes: Taxes witheld in 2019 \ 12,500 Refund received in 2019 for 2018 tax \ 500 Assessment paid in 2019 for 2017 tax \ 300 Assuming he deducts state and local income taxes, the above information should be reported by Harvey in his 2019 tax return as:

The cost of a chiropractor's services qualifies as a medical deduction.