PH7ky412

PH7ky412 - CHAPTER 7 ITEMIZED DEDUCTIONS 1. MEDICAL...

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CHAPTER 7
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ITEMIZED DEDUCTIONS 1. MEDICAL EXPENSES 2. TAXES 3. INTEREST 4. CHARITABLE CONTRIBUTIONS 5. MISCELLANEOUS I. MEDICAL EXPENSES - A. What is deductible? 1. Amounts paid for the diagnosis, cure, relief, treatment, or prevention of disease, or a condition affecting the structure or function of the body--for taxpayer, spouse, and dependents. a. The status of the taxpayer's spouse or dependent must exist either at the time the medical services are rendered or at the time the expenses are paid. 1) Both the gross income test and the joint return test are waived for purposes of determining dependency status.
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2) Medical expenses of children of divorced parents are deductible by the parent who pays the expenses. b. Amounts must be paid in the year the expense is claimed. 2. Deductions for medicines and drugs are limited to expenditures for prescription drugs. 3. Capital expenditures are deductible in part or in full. a. Expenditures which do not affect the market value of taxpayer's home are deductible in full (e.g., wheelchairs, crutches, eyeglasses). b. Expenditures which affect the market value of taxpayer's home (improvement or betterment) are deductible to the extent they exceed the increase in FMV (e.g., swimming pools). c. Expenditures for removing structural barriers for the handicapped are fully deductible (e.g., elevators, exit ramps). d. The maintenance costs of the above are also deductible. 4. Travel costs to seek medical treatment are deductible. a. Automobiles - keep records of actual expenses or use the per diem rate of 16½¢/mile plus parking fees and tolls. b. Meals - 1) Meals while en route to and from treatment are 50% deductible. 2) 100% of meals while at the medical facility are deductible if taxpayer is an in-patient. 3) No deduction is allowed while at the medical facility for out-patients and for those who accompany the patient.
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c. Lodging - limited to $50/night/person. 5. Costs of staying at an institution (tuition) are deductible if patient is placed there on doctor's orders.
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6. Health insurance premiums - a. Employees - Dfrom AGI. b. Self-employed - 100% Dfor AGI. 7. Long-term care - a. Insurance premiums - deductible with limits (see footnote 8, page 7-5). b. Long-term care expenditures - deductible if “chronically ill” for ≥ 90 days. B. When is the medical expense deductible? 1. Only in the year in which the medical expense is actually paid (credit card payment is considered "paid"). 2. Prepayments are not allowed as deductions unless the taxpayer is required to make the prepayment. C. What amount is deductible? 1. Medical expenses, net of any insurance reimbursements, in excess of 7.5% of AGI are deductible. 2. If insurance reimbursements are received in a subsequent year, follow the tax benefit rule to determine if any of the reimbursement is taxable (review example 7 on page 7-7 carefully).
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Example --Carpenter, who is not self-employed, incurred the following expenses during 2011: Hospitalization insurance premiums
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This note was uploaded on 10/03/2011 for the course ACCT 412 taught by Professor Crabtree during the Spring '11 term at UNL.

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PH7ky412 - CHAPTER 7 ITEMIZED DEDUCTIONS 1. MEDICAL...

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