. Randall purchased business computers on May 15, 2015, for $20,000. On November
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Question
. Randall purchased business computers on May 15, 2015, for $20,000. On November 15, 2015 he purchased office furnit Randall did not elect to expense any of the assets elect straight-line cost recovery. Randall did elect to take additional deduction for these business assets for ure for $15,000. first-year depreciation. Calculate the total cost recovery 2015. is single with AGI of $400,000. Pearson has the following itemized deductions in 2015: Qualified medical expenses State income taxes Real estate taxes Qualified home mortgage interest Unreimbursed employee expenses Charitable contribution $10,000 $15,000 $18,000 $25,000 $10,000 XYZ Corporation stock Pearson personal residence has a FMV of $1.2 million and the mortgage balance is $800,000. Pearson purchased XYZ stock for $15,000 in 2010, and the stock had a fair market value of 530,000 when he made the donation. Calculate the amount of Pearson's 2015 itemized deductions.Explanation / Answer
List of Itemized Deductions:
1. Medical expenses, to the extent that the expenses exceed 10% of the taxpayer's AGI (changed from 7.5% as of January 1, 2013 except for individuals 65 and over, who will use the 7.5% floor until January 1, 2017).(e.g., a taxpayer with an AGI of $20,000 and medical expenses of $5,000 would be eligible to deduct $3000 of their medical expenses ( 20,000 X .10 = 2000; 5000 - 2000 = 3000 ).) The 10% floor means that most taxpayers are unable to take advantage of the medical expense deduction.
2. State and local taxes paid, including:
3. Mortgage interest expense on debt incurred in connection with up to two homes, subject to limits (up to $1,000,000 in purchase debt, or $100,000 in home equity loans)
4. Charitable contributions to allowable recipients; this deduction is limited to either 30% or 50% of AGI, depending on the characterization of the recipient. Donations can be made as money, or in the form of goods. The value of donated services cannot be deducted as a contribution. Reasonable expenses necessary to provide donated services can, however, be deducted (such as mileage, special uniforms, or meals). Non-cash donations valued at more than $500 require special substantiation on a separate form. Non-cash donations are deductible at the lesser of the donor's cost or the current fair market value, unless the non-cash donation has been held for greater than a year (Long term), in which case it can be deducted at fair market value.
5.Casualty and theft losses, to the extent that they exceed 10% of the taxpayer's AGI (in aggregate), and $100 (per event, $500 starting tax year 2009)
6. Gambling losses, but only to the extent of gambling income.
Miscellaneous Itemized deductions:
It is important to distinguish miscellaneous itemized deductions from other “normal” itemized deductions. The reason for this is because miscellaneous itemized deductions are subject to a 2% floor, a.k.a. the "2% Haircut." A taxpayer can only deduct the amount of miscellaneous itemized deductions that exceed 2% of their adjusted gross income.For example, if a taxpayer has adjusted gross income of $50,000 with $4,000 in miscellaneous itemized deductions, the taxpayer can only deduct $3,000, since the first $1,000 is below the 2% floor. There are 12 deductions listed in 26 U.S.C. § 67(b). These are NOT miscellaneous itemized deductions, and thus not subject to the 2% floor (although they may have their own rules). Any deduction not found in section 67(b) is a miscellaneous itemized deduction.Examples include:
Particulars Amount ($) Medical Expenses 10,000 State Income Tax 15,000 Real Estate Tax 18,000 Qualified Mortage Interest 25,000 Charitbale Contribution 30,000 Umreimbursed employee expenses 2,000 Total Itemized Dedcutions 100,000Related Questions
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