Chapter 18 - Deductions for Individuals Only without Homework

Chapter 18 - Deductions for Individuals Only without Homework

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Unformatted text preview: Chapter 18 Deductions for Individuals Only 62 Definition of Adjusted Gross Income There is no similar concept in corporate taxation as AGI. Adjusted Gross Income Why is AGI Important? It helps us determine at least the following: Charitable contributions limitations 469 Rental real estate limits Medical deductions Miscellaneous itemized deductions Phase-out of itemized deductions Phase-out of personal exemptions Taxation of Social Security benefits Others Adjusted Gross Income What is AGI: Gross Income Less: Deductions for AGI, which include: Moving Expenses IRA deductions Other retirement deductions Health care insurance costs for self-employed Certain qualified education expenses Others Adjusted Gross Income 62 defines adjusted gross income as gross income less the deductions specified in 62. Only the deductions noted in 62 are deductions FOR AGI. If the deductions are not mentioned in this section, they must end up being itemized deductions. Adjusted Gross Income Since we have already studied these expenses, I will be skipping the Moving expense and qualified tuition sections tonight, and they will NOT be included in the final exam as they were concepts we studied for the mid-term. Move right into the Itemized Deductions portion Itemized Deductions Itemized Deductions What are itemized Deductions? Generally, they are deductions allowed to individuals due to Congressional grace to encourage certain behaviors or stimulate certain industries or put employed individuals on a somewhat equal footing with self-employed people. Itemized Deductions The major categories of itemized deductions: Medical expenses (7.5% floor based on AGI) State and Local Taxes Interest Expense Charitable Contributions (with limitations based on AGI) Casualty and Theft Losses Miscellaneous Deductions Itemized Deductions We have already discussed: State and Local Taxes Interest Expense So today we will first focus on: Medical Expenses Miscellaneous Deductions Other Deductions Personal Exemptions Standard Deductions Medical Expenses 213. Medical, dental, etc., expenses (a) Allowance of deduction There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152 determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), to the extent that such expenses exceed 7.5 percent of adjusted gross income. (b) Limitation with respect to medicine and drugs An amount paid during the taxable year for medicine or a drug shall be taken into account under subsection (a) only if such medicine or drug is a prescribed drug or is insulin. Medical Expenses (d) Definitions For purposes of this section (1) The term medical care means amounts paid...
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This note was uploaded on 09/27/2008 for the course BUS 1000 taught by Professor Professor during the Spring '08 term at Cal Poly.

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Chapter 18 - Deductions for Individuals Only without Homework

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