Exam 5: Deductions and Adjustments to Income

Which of the following taxpayers qualifies for the maximum traditional individual retirement account deduction for 2018?

Douglas and Dena paid the following amounts of interest during the current year:​ Qualified home mortgage interest \1 4,000 Other consumer interest \5 ,000 Investment interest \1 0,000 (no investment income) a.Calculate the amount of their allowable deduction for investment interest for the current year. b.Calculate the amount of Douglas and Dena's total allowable deduction for interest for the current year.

Agnes is retired and has only a $12,000 annual pension as income.In 2018, Agnes' aunt dies and leaves her land worth $1.2 million.Agnes sees no need for the land and donates it immediately to a qualified public charity.Agnes may deduct a $1.2 million charitable contribution on her 2018 tax return.

Lodging for a trip associated with medical care associated with a licensed hospital is not deductible.

During 2018, 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?

For an individual taxpayer with AGI of $65,000, private mortgage insurance (PMI)is deductible in 2018.

Moe has a law practice and earns $322,000 which he reports on his Schedule C.His wife, Mindy, works part-time at Wal-Mart and earns $8,300.Mindy does not receive any medical benefits through Wal-Mart.Their 29-year-old daughter, Michelle, who is not a dependent, is working toward earning her Master's degree.Moe and Mindy pay the following amounts: Health insurance for Moe and Mindy \ 8,100 Dental insurance for Moe and Mindy 600 Vision care insurance for Moe and Mindy 425 Health insurance for their daughter 3,620 Long-term care insurance for Moe who is 54 years old 1,680 How much may Moe and Mindy claim on their tax return as a self-employed health insurance deduction?

Miki, who is single and 57 years old, has a qualifying high-deductible insurance plan.She had the following transactions with her HSA during the year:​ Contributions to her HSA \3 ,500 Interest income earned on her HSA 9 Medical expenses paid from her HSA 5,739 HSA distribution to pay for her daughter's wedding 7,650 a.How much may Miki claim as a deduction for adjusted gross income? b.What is the amount that Miki must report on her federal income tax return as income from her HSA? c.How much is subject to a penalty? What is the penalty percentage?

Unreimbursed qualifying moving expenses are an itemized deduction for 2018.

The interest paid on a loan used to acquire municipal bonds is not deductible.

Frank is a resident of a state that imposes a tax on income.The following information pertaining to Frank's state income taxes is available: State income taxes withhel d in 2018 \3 ,500 Refund of 2015 tax received in 2018 \4 00 Deficiency assessed and paid in 2018 for 2016 : State tax \6 00 Interest \1 00 What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2018 Federal tax return, assuming he deducts state and local income taxes?

Which of the following is not an itemized deduction?

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

Premiums paid for life insurance policies are deductible as medical expenses.

Jody is a physician (not covered by a retirement plan)with a salary of $40,000 from the hospital where she is employed.She supports her husband, Andre, who sells art work and has no earned income.Both are in their twenties.What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2018 tax year?