3b - Detailed Itemized

3b - Detailed Itemized - Deductions From AGI: Itemized...

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Unformatted text preview: Deductions From AGI: Itemized Deductions and The Standard Deduction Federal Individual Income Tax Online Lecture Series Presented by Akore Berliner, CPA Taxable Income Formula Income (broadly conceived) $x,xxx Less: Exclusions (x,xxx) Gross Income $x,xxx Less: Deductions for AGI (x,xxx) Adjusted Gross Income (AGI) $x,xxx Less: The greater of: Total itemized deductions or the standard deduction (x,xxx) Personal & dependency exemptions (x,xxx) Taxable Income $x,xxx Itemized Deductions • Total Itemized Deductions must exceed the allotted standard deduction for the specific taxpayer Itemized Deductions….. Itemized Deductions 1. Medical expenses 2. Taxes State Taxes, Real Estate Taxes 1. Interest Mortgage Interest, Investment 1. Charitable Contributions 2. Miscellaneous itemized deductions Unreimbursed Employee Expenses Overall Limitation on Itemized Deductions • AGI in excess of the specified threshold causes Itemized items to phase out ▫ Threshold amount in 2008 is $159,950 ($79,975 if married, filing separately) • Itemized deductions subject to possible reduction include: ▫ Taxes, home mortgage interest, charitable contributions, and miscellaneous deductions • Medical, investment interest, casualty & theft losses, and gambling losses are not subject to reduction Medical Expenses as Itemized Deductions….. Medical Expenses • Deductible to extent they exceed 7.5% of AGI • Diagnosis, cure, mitigation, treatment, prevention of disease, or for purpose of affecting any structure or function of the body of the taxpayer, spouse, or dependents prescription drugs and insulin • Does not include: Unnecessary cosmetic surgery General health items Nonprescription drugs Medical Expenses • Example of medical expense deduction limitation: Sidd has AGI of $10,000 and medical expenses of $1,000 Sidd’s medical expense deduction = $250 [$1,000 – ($10,000 × 7.5%)] • Deductible in year paid Includes payment by check or credit card Other Medical Expenses • Nursing Home ▫ Primary reason for being in nursing home is medical Meals and lodging qualify ▫ Primary purpose is personal, only specific medical costs qualify (no meals or lodging) • Special School ▫ School for a mentally or physically handicapped individual ▫ Principal reason for school is the school’s special resources for alleviating the infirmities ▫ Cost of meals, lodging, and tuition Capital Medical Expenditures • Must be: 1. medical necessity 2. advised by a physician 3. used primarily by patient 4. and expense is reasonable • Full amount of cost is medical expense in year paid...
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This note was uploaded on 02/01/2012 for the course ACC 2546 taught by Professor Dean during the Summer '10 term at San Diego State.

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3b - Detailed Itemized - Deductions From AGI: Itemized...

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