CH. 10 outline

CH. 10 outline - Tempest Southall Chapter 10 outline...

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Tempest Southall Chapter 10 outline Chapter 10: Deductions and Losses: Certain Itemized deductions Itemized Deductions Personal expenditures that are deductible from AGI as itemized deductions include: Medical expenses Certain taxes Mortgage and investment interest Charitable Contributions Miscellaneous itemized deductions Itemized deductions provide a tax benefit only to extent that, in total, they exceed the standard deduction amount for the taxpayer Medical Expense Medical expenses are deductible to the extent unreimbursed medical expenses, in total, exceed 7.5% of AGI Example of medical expense deduction limitation: Amy has AGI of $10,000 and medical expenses of $1,000 Amy’s medical expense deduction = $250 [$1,000 – ($10,000 × 7.5%)] Expenditures for: The diagnosis, cure, mitigation, treatment, prevention of disease, or The purpose of affecting any structure or function of the body of the taxpayer, spouse, or dependents Includes prescription drugs and insulin Does not include the cost of items such as : Unnecessary cosmetic surgery General health items
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Nonprescription drugs If cosmetic surgery is deemed necessary, it is deductible as a medical expense Cosmetic surgery is necessary when it ameliorates o A deformity arising from a congenital abnormality o A personal injury, or o A disfiguring disease Medical expenditures are deductible in year paid Includes payment by check or credit card Nursing Home expenditures If primary reason for being in nursing home is medical, costs (including meals and lodging) qualify If primary purpose of placement in home is personal, only specific medical costs qualify (no meals or lodging) Special School Expenditures Medical expense deduction may include the expenses of a special school for a mentally or physically handicapped individual Deduction is allowed if a principal reason for sending the individual to the school is the school’s special resources for alleviating the infirmities In this case, the cost of meals and lodging, in addition to the tuition, is a proper medical expense deduction Capital Medical Expenditures May include a pool, air conditioners if they do not become permanent improvements, dust elimination systems, elevators, etc. Must be medical necessity, advised by a physician, used primarily by patient, and expense is reasonable Full amount of cost is medical expense in year paid Maintenance on capital expenditures also medical expense Capital Improvement to Home
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Deductible medical expense only to extent cost exceeds increase in value of home o Appraisal costs related to capital improvements are also deductible, but not as medical expenses Exception: removal of structural barriers to home of handicapped are deemed to add no value to home o Thus, full amount is a medical expense Medical Care for Spouse and dependents Taxpayer may deduct cost of medical care for spouse and dependents
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CH. 10 outline - Tempest Southall Chapter 10 outline...

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