Exam 5: Itemized Deductions

How is the medical expense deduction calculated? How is it limited?

Generally, the taxpayer may deduct the cost of medical expenses on Schedule A for which of the following?

Cynthia lives in California, a state that imposes a tax on income. The following information relates to Cynthia's state income taxes for 2015: Assuming she elects to deduct state and local income taxes, what amount should Cynthia use as an itemized deduction for state and local income taxes for her 2015 federal income tax return?

A taxpayer generally has the option of deducting foreign taxes paid on Schedule A or taking a foreign tax credit.

Which of the following organizations qualify for deductible charitable contributions?

On December 31, 2015, Roger charged a $1,800 contribution to a qualified charitable organization to his credit card. He will not pay the credit card bill until January 2016. The $2,200 contribution is deductible on Roger's 2015 tax return.

Define a personal casualty loss.

Shanika lives in California which imposes a state tax on income. For 2015, Shanika had the following transactions related to her state income taxes: Shanika plans to itemize on her 2015 return. What amount of state and local taxes should Shanika deduct in calculating itemized deductions for her 2015 federal income tax return?

Theft losses are deducted in the tax year in which the theft was discovered, rather than the year of theft, if the discovery comes later.

Unreimbursed employee business expenses for travel qualify as itemized deductions subject to the 2% floor.

Which of the following statements is true regarding documentation requirements for charitable contributions?

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

In 2015, Alan was required by his employer to use his car for work. His employer's mileage reimbursement was $0.25 per mile. If Alan's actual expenses are more than the reimbursement, he can deduct the excess amount on Schedule C.

Which of the following may not be deducted either totally or partially as medical expenses? (Disregard any limitations which may apply.)

Mrs. Gonzales must use a wheelchair. Upon advice from her physician, she installed an elevator and widened the front entrance of her house in 2015, incurring $15,000 and $4,000 in costs, respectively. Mrs. Gonzales originally purchased her house for $152,000. An appraisal showed the fair market value of Mrs. Gonzales' house immediately after these modifications at $162,000. Compute her currently deductible medical expense in regards to these improvements before AGI limitations.

Melissa earned net investment income of $11,000 during 2015 and incurred investment interest expense of $3,000 during the year related to a stock purchase. She incurred other investment interest expenses of $7,000 during the year. Melissa is limited to a deduction of $3,000 of investment interest expense in 2015.

Which of the following interest expenses incurred by Amanda is treated as personal interest expense and, therefore, not deductible as an itemized deduction?

Which of the following expenses is not deductible as medical expense?

Marty and Cindy are married and both are professors at a local college. They contribute money to various organizations each year and file a joint return. Their adjusted gross income for 2015 is $100,000. They contributed to the following organizations in 2015: • $3,500 to the Sierra club • $10,000 to the Red Cross • $2,000 to a local political candidate • $11,000 to cancer research foundation • Donated clothing to Goodwill. (Marty purchased the items for $850, but the thrift shop value of the same items at a local second-hand store is equal to $60.) How much can Cindy and Marty deduct as charitable contributions for the year 2015?

For medical expenses, only expenses in excess of 7.5 percent of adjusted gross income are deductible.