For calendar year 2020 Matt and Lauren, ages 40 and 39, and both secondary school teachers, file a joint return reflecting AGI of $280,000. They incur the following expenditures:
Medical expenses (before the 7.5% of AGI limitation) $30,000
State and local income taxes 15,000
State sales tax 1,300
Real estate taxes on their home 13,000
Home mortgage interest 11,000
Automobile loan interest 750
Credit card interest 1,000
Charitable contributions 17,000
Casualty loss caused by an electrical fire in their home 30,000
Tax return preparation fee 1,200
Supplies for use in the classroom (not reimbursed) 500
Calculate their allowable itemized deductions for the year.
Answer :
Particulars | Amount | Itemized Deduction |
Medical expenses before AGI Floor | $30,000 | - |
Less : 10% of AGI (280000) | -$28,000 | $2,000 |
Casuality Loss | $30,000 | - |
Less : | -$100 | - |
Less : 280000*10% | -$28,000 | $1,900 |
Interest on Home Mortagage | $10,000 | $10,000 |
Property taxes on home | $13,000 | $13,000 |
Charitable contribution (limited upto 50% of AGI) | $17,000 | $17,000 |
State income tax | $15,000 | $15,000 |
Tax preparation fees | $1,200 | - |
Less : 2% of AGI (2%*280000) = 5600 Limited to 1200 | -$1,200 | $0 |
Itemized deduction | - | $58,900 |
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