Exam 10: Deductions and Losses: Certain Itemized Deductions

For purposes of computing the deduction for qualified residence interest,a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.

Rick and Carol Ryan,married taxpayers,took out a mortgage of $160,000 when purchasing their home ten years ago.In October of the current year,when the home had a fair market value of $200,000 and they owed $125,000 on the mortgage,the Ryans took out a home equity loan for $110,000.They used the funds to purchase a sailboat to be used for recreational purposes.The sailboat does not qualify as a residence.What is the maximum amount of debt on which the Ryans can deduct home equity interest?

Phyllis,a calendar year cash basis taxpayer who itemized deductions totaling $20,000,overpaid her 2016 state income tax and is entitled to a refund of $400 in 2017.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2017.She is required to recognize that amount as income in 2017.

In January 2018,Pam,a calendar year cash basis taxpayer,made an estimated state income tax payment for 2017.The payment is deductible in 2017.

Jack sold a personal residence to Steven and paid points of $3,500 on the loan to help Steven finance the purchase.Jack can deduct the points as interest.

Excess charitable contributions that come under the 30%-of-AGI ceiling are always subject to the 30%-of-AGI ceiling in the carryover year.

During the current year,Ralph made the following contributions to the University of Oregon (a qualified charitable organization): Ralph acquired the stock in Raptor,Inc.,as an investment fourteen months ago at a cost of $42,000.Ralph's AGI for the year is $189,000.What is Ralph's charitable contribution deduction for the current year?

Helen pays nursing home expenses of $3,000 per month for her mother.The monthly charge covers the following items: $1,400 for medical care,$900 for lodging,and $700 for food.Under what circumstances can Helen include the $3,000 per month payment when computing her medical expense deduction for the year? If Helen is not allowed to include the entire payment,how much can she include?

Fees for automobile inspections,automobile titles and registration,bridge and highway tolls,parking meter deposits,and postage are not deductible if incurred for personal reasons,but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

Joe,a cash basis taxpayer,took out a 12-month business loan on December 1,2017.He prepaid all $3,600 of the interest on the loan on December 1,2017.Joe can deduct only $300 of the prepaid interest in 2017.

A phaseout of certain itemized deductions applies for all taxpayers who choose to itemize their deductions.

In 2017,Brandon,age 72,paid $3,000 for long-term care insurance premiums.He may include the $3,000 in computing his medical expense deduction for the year.

Adrienne sustained serious facial injuries in a motorcycle accident.To restore her physical appearance,Adrienne had cosmetic surgery.She cannot deduct the cost of this procedure as a medical expense.

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year.The entire amount qualifies as an expense deductible for AGI.

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

Phillip,age 66,developed hip problems and was unable to climb the stairs to reach his second-floor bedroom.His physician advised him to add a first-floor bedroom to his home.The cost of constructing the room was $32,000.The increase in the value of the residence as a result of the room addition was determined to be $17,000.In addition,Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair.Phillip's AGI for 2017 was $75,000.How much of these expenditures can Phillip deduct as a medical expense in 2017?

A taxpayer may not deduct the cost of new curbing (relative to a personal residence),even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

Employee business expenses for travel qualify as itemized deductions subject to the 2%-of-AGI floor if they are not reimbursed.

Hugh,a self-employed individual,paid the following amounts during the year: ​ What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?

In 2017,Allison drove 800 miles to volunteer in a project sponsored by a qualified charitable organization in Utah.In addition,she spent $250 for meals while away from home.In total,Allison may take a charitable contribution deduction of $112 (800 miles × $.14) relating to her volunteer work.