Chapter 5

Chapter 5 - 83 Chapter 5 Personal Itemized Deductions...

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© 2010 CCH. All Rights Reserved. Chapter 5 83 Chapter 5 Personal Itemized Deductions Highlights of 2010 Tax Changes The mileage rate for medical is $.165 for 2010 (down from $.24 per mile in 2009). The mileage rate for charitable contributions remains at $.14. At the time the book went to press, the itemized deduction for general sales tax (in lieu of state and local income taxes) had not been renewed for 2010. However, many believe it will be restored before the end of 2010. In 2010, the casualty and theft loss f oor is $100 per event (down from $500 in 2009). In 2010, there is no reduction in total itemized deductions for higher-income taxpayers. The reduction for higher-income taxpayers is scheduled to return in 2011. Teaching Suggestions To help students understand the importance of AGI in determining the itemized deductions described in 1. Chapter 5, assist them in developing a list of the various AGI limitations imposed on these deductions. The list should include: Medical expenses 7.5% Charitable contributions 50%, 30%, 20% Casualty losses 10% Miscellaneous itemized deductions (next chapter) 2% As you go through each topic in Chapter 5, it might be useful to show a copy of Schedule A on an overhead, 2. or alternatively, have students open their books to Figure 5-1, where the Neals’ Schedule A is illustrated. Each topic discussed in this chapter follows the organization of Schedule A. Having a copy of Schedule A handy will make it easy to review each topic in order. Solutions to Questions and Problems ¶503. 1. Prescription drugs $ 400 Doctors and insurance premiums 1,170 Other medical expenses: Hearing aid $525 Eyeglasses 130 655 $2,225 Less: 7.5% AGI ($24,000 × 7.5%) ( 1,800) Medical and dental expense deduction $ 425
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84 Essentials of Federal Income Taxation Chapter 5 © 2010 CCH. All Rights Reserved. a. 2. Item Deductible? Deductible Amount 1. Health insurance premium Yes $386 2. Life insurance premium No 0 3. Accident insurance No 0 4. Acne cream No 0 5. Prescription drugs Yes 300 6. Vitamins No 0 7. Cosmetics No 0 8. Dr. Wall, DDS Yes 120 9. Health spa dues No 0 10. X-ray examination Yes 60 11. City Hospital Yes 375 12. Eyeglasses Yes 125 13. Cemetery plot No 0 14. Medical: 1,000 miles × $.165 Yes 165 15. Illegal drugs No 0 16. Vacation No 0 17. Dr. Root Yes 350 18. Wheelchair Yes 275 19. Dr. Spencer Yes 580 Total $2,736 b. ¶503. Unreimbursed medical and dental expenses $2,736 Less: 7.5% AGI ($34,290 × 7.5%) ( 2,572) Medical and dental expense deduction $ 164 a. The $455 would offset the expenses paid in 20X2. ¶503.04. 3. b. The $455 is not taxable and would not be reported. ¶503.04. c. The $455 must be included in gross income since the medical expenses deduction of $840 taken in the prior year exceeds the reimbursement. ¶503.04. d.
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This note was uploaded on 01/14/2012 for the course ECON 121 taught by Professor Mcdevitt during the Winter '10 term at UCLA.

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Chapter 5 - 83 Chapter 5 Personal Itemized Deductions...

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