Chapter 7 itemized deductions
Chapter 7 Itemized Deductions
Learning Objectives Identify qualified medical expenses and compute the medical expense deduction Determine the timing of a medical expense deduction and the effect of a reimbursement Identify taxes that are deductible as itemized deductions
Learning Objectives • Identify qualified medical expenses and compute the medical expense deduction • Determine the timing of a medical expense deduction and the effect of a reimbursement • Identify taxes that are deductible as itemized deductions
Learning Objectives Identify different types of interest deductions Compute the amount of investment interest deduction Compute the deduction for qualified residence interest
Learning Objectives • Identify different types of interest deductions • Compute the amount of investment interest deduction • Compute the deduction for qualified residence interest
Learning Objectives Compute the amount of a charitable contribution deduction and identify limitations Identify certain miscellaneous itemized deductions subject to the 2% of AGl limitation Compute total itemized deductions for a taxpayer who is subject to the itemized deduction phase-out
Learning Objectives • Compute the amount of a charitable contribution deduction and identify limitations • Identify certain miscellaneous itemized deductions subject to the 2% of AGI limitation • Compute total itemized deductions for a taxpayer who is subject to the itemized deduction phase-out
Medical Expenses Qualified individuals Qualified medical expenses Amount and timing of deduction
Medical Expenses • Qualified individuals • Qualified medical expenses • Amount and timing of deduction
Qualified Individuals Medical expenses paid for the taxpayer, taxpayer's spouse, or dependent For dependents: if the taxpayer could take a dependency deduction except for the failure to meet the gross income or joint return tests For children of divorced parents: the parent need not be the custodial parent in order to take deduction for medical expenses paid on behalf of a person
Qualified Individuals • Medical expenses paid for the taxpayer, taxpayer’s spouse, or dependent • For dependents: if the taxpayer could take a dependency deduction except for the failure to meet the gross income or joint return tests • For children of divorced parents: – the parent need not be the custodial parent in order to take deduction for medical expenses paid on behalf of a person
Qualified Medical Expenses Those paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, including transportation, meals lodging, certain capital expenditures, medical insurance premiums. In 2001 self-employed individuals may deduct 60 %of health insurance as a deduction for AGL. In 2002 will the percentage will increase to 70 No cosmetic surgery unless it treats illness or promotes proper body function
Qualified Medical Expenses • Those paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, including transportation, meals & lodging, certain capital expenditures, & medical insurance premiums. • In 2001 self-employed individuals may deduct 60 % of health insurance as a deduction for AGI. In 2002 will the percentage will increase to 70% • No cosmetic surgery unless it treats illness or promotes proper body function
Qualified Medical Expenses Transportation that is primarily for and essential to qualified medical care Medical insurance premiums Qualified long-term care insurance premiums Capital expenditures must meet standard
Qualified Medical Expenses • Transportation that is primarily for and essential to qualified medical care • Medical insurance premiums • Qualified long-term care insurance premiums • Capital expenditures must meet standard
Amount And Timing Of Deduction Medical expense deduction is only allowed to the extent qualified medical expenses exceed 7.5% of AGI During tax year reimbursements reduce allowable deductions Subsequent tax years reimbursements included in gross income under the tax benefit rule
Amount And Timing Of Deduction • Medical expense deduction is only allowed to the extent qualified medical expenses exceed 7.5% of AGI • During tax year - reimbursements reduce allowable deductions • Subsequent tax years - reimbursements included in gross income under the tax benefit rule
Statutory Definition Of A Tax Mandatory assessment levied under the authority of a political entity for the purpose of raising revenue to be used for public or governmental purposes
Statutory Definition Of A Tax • Mandatory assessment levied under the authority of a political entity for the purpose of raising revenue to be used for public or governmental purposes
