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3b - Detailed Itemized

3b - Detailed Itemized - OnlineLectureSeries Deductions...

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Deductions From AGI: Itemized Deductions and The Standard Deduction Federal Individual Income Tax  Online Lecture Series Presented by Akore Berliner, CPA
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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
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Itemized Deductions Total Itemized Deductions must exceed the  allotted standard deduction for the specific  taxpayer
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Itemized Deductions…..
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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
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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
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Medical Expenses  as Itemized Deductions…..
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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
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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
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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
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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 Maintenance on capital expenditures also medical  expense
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