Exam 5: Deductions and Adjustments to Income

Stan, a single taxpayer, has $1,700 of state income taxes withheld from his wages in the current year.In the current year, he also received a $320 refund on his prior year state income tax.Stan did not itemize last year but he intends to do so this year.Stan used the sales tax estimate tables and determined his sales tax deduction amount is $1,600.What amount should Stan deduct for state taxes?

Alice purchases a new personal auto and finances the purchase through the dealer.The interest of $760 she pays on the car loan during the current tax year is deductible.

The 2018 standard mileage rate for taxpayer use of a personal auto for transportation for medical care is $.19 per mile.

Jeremy, age 38, has $25,000 in a traditional IRA account and is considering taking the money out to buy himself a new car.What will be the tax consequences to Jeremy if he withdraws the $25,000 from his IRA in 2018 for this purpose? Explain.

Individual taxpayers may carry forward indefinitely charitable contributions that are not allowed as a deduction in the current year due to the adjusted gross income limitation.

Perry Mayson, a single taxpayer, graduated law school last year with quite a bit of qualified student loan debt and ends up paying $4,300 in interest on the loan in the current tax year.Fortunately, Perry is well compensated and earns adjusted gross income of $85,000 during the current year.Perry may deduct his student loan interest in the current year.

Stewart had adjusted gross income of $22,000 in 2018.During the year, he made the following contributions to qualified charities:- $7,000 cash- 1,000 shares of Able Corporation common stock, acquired in 1990 (cost and fair market value of $5,000)Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2018?

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

Which of the following is true about the self-employed health insurance deduction?

Bill has a mortgage loan on his personal residence.He decides to pay 18 months of interest in advance on October 1, 2018.The total advanced interest payment is $36,000.How much of the advance interest payment can he deduct in 2018?

During 20187, Sarah, age 29, had adjusted gross income of $12,000 and paid the following amounts for medical expenses: Medical insurance \ 400 Prescription medications \ 160 Hospital bills \ 575 Doctors' bills \ 310 Dental bills \ 180 In 2018, Sarah drove 139 miles for medical transportation in her personal automobile, and she uses the standard mileage allowance.Her insurance company reimbursed Sarah $300 during the year for the above medical expenses.Using the schedule below, calculate the amount of Sarah's deduction for medical and dental expenses for the 2018 tax year.

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2018 tax returns, assuming their self-employment income exceeds their medical insurance payments?

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

Which of the following types of interest are likely to be deductible in 2018?

Gwen has written acknowledgments for each of the following charitable contributions during the current year: Cash contributions to her church \1 ,250 Contribution of used clothes and household items in good condition to AMVETS, valued at thrift shop prices (original cost, \ 1,000 ) \2 00 Gwen's estimate of the value of her time donated to a local soup kitchen \8 00 Cash donated to homeless people asking for money for food \7 5 What is Gwen's charitable contribution deduction for the current year?

Jake developed serious health problems and had his bathroom remodeled so it is wheelchair-accessible and had a handicapped shower installed, based on a written prescription by his doctor.The cost of the remodel is $15,000 and is deemed to add no value to his house by a real estate appraiser.How is the cost of the remodel treated on Jake's tax return?

Sherry had $5,600 withheld from her wages for state income taxes during 2018.In May of 2018, she received a $450 refund for her prior year state tax return.The amount of Sherry's state income tax on her 2018 tax return is $6,100 and she pays the additional tax of $500 ($6,100 − $5,600)when she files her state income tax return in April of 2019. a.Assuming she deducts state income tax, how much state income taxes should Sherry deduct on Schedule A of Form 1040 of her 2018 federal income tax return? b.How should Sherry report the $450 refund?

What is the difference between the tax treatment of contributions and distributions from a traditional IRA and a Roth IRA?

During the current year, Seth, a self-employed individual, paid the following taxes: Federal income tax \ 15,000 State income tax \ 8,500 Real estate taxes on land in South America (held as an investment) \ 1,000 State sales taxes 300 Personal property taxes based upon value \ 1,600 Federal self-employment tax \ 800 What amount can Seth claim as an itemized deduction for taxes paid during the current year?

During 2018, Ruth, a nurse at Dr.Pan's office, incurred the following expenses: Brokerage account custodial fee \ 40 Professional subscriptions to nursing magazines \ 110 Tax return preparati on fee \ 240 Tax advice related to a pri or year tax return IRS audit \ 310 Nursing uniform expenses \ 200 If Ruth's adjusted gross income is $29,000, calculate her net miscellaneous deductions after the adjusted gross income percentage limitation.