LH SU6 Itemized Deductions

Below the line deductions are deductions that

may be subtracted from AGI to arrive at taxable income

Below the line deductions include

itemized

standard

QBI

or one of the additional deductions on schedule 1A

AMOUNTS PAID FOR QUALIFIED MEDICAL EXPENSES THAT EXCEED ___ OF ___ MAY BE DEDUCTED

7.5% OF AGI MAY BE DEDUCTED

REQUIREMENTS TO QUALIFY FOR THE MEDICAL EXPENSES DEDUCTION

1. EXPENSE MUST BE PAID DURING THE TAX YEAR

2. EXPENSE MUST BE FOR TP, SPOUSE OR DEPENDENT DURING TIME SERVICES WERE RENDERED OR AT THE TIME EXPENSES WERE ACTUALLY PAID

3. EXPENSE MUST NOT BE COMPENSATED FOR BY INSURANCE OR OTHERWISE DURING TAX YEAR

4. EXPENSES MUST BE PRIMARILY TO ALLEVIATE OR PREVENT A PHYSICAL OR MENTAL DISABILITY OR ILLNESS

MEDICAL EXPENSES CHARGED ON A CREDIT CARD ARE ___ IN THE YEAR THE ______ NOT WHEN THE ____ BILL IS ____

MEDICAL EXPENSES CHARGED ON A CREDIT CARD ARE DEDUCTIBLE IN THE YEAR THE MEDICAL EXPENSES WERE INCURRED NOT WHEN THE CREDIT CARD BILL IS PAID

TO BE A DEPENDENT FOR THE MEDICAL EXPENSES ITEMIZATION, WHAT ABOUT THE GI OR JOINT RETURN TEST

INDIVIDUAL DOES NOT NEED TO SATISFY THE GROSS INCOME OR JOINT RETURN TEST AND A CHILD OF DIVORCED PARENTS IS TREATED AS DEPENDENT OF BOTH PARENTS

EXAMPLES OF DEDUCTIBLE MEDICAL EXPENSES

1. MEDICAL INSURANCE

2. QUALIFIED LONG TERM CARE PREMIUMS AND SERVICES

3. SMOKING CESSATION PROGRAMS AND PRESCRIBED DRUGS TO ALLEVIATE NICOTINE WITHDRAWAL

4. TRANSPORTATION PRIMARLY FOR AND ESSENTIAL TO MEDICAL CARE

ELECTIVE COSMETIC PROCEDURE NOT RELATED TO A PHYSICAL INJURY IS IT DEDUCTIBLE

NO

MEDICAL EXPENSE DEDUCTION IS NOT ALLOWED FOR AMOUNTS PAID FOR ANY ACTIVITY OR TREATMENT DESIGNED MERELY TO

IMPROVE AN INDIVIDUALS GENERAL HEALTH OR SENSE OF WELLNESS EVEN IF RECOMMENDED BY DR. EXAMPLE IS PARTICIPATION IN HEALTH CLUB OR WEIGHT LOSS INSTITUTE.

EXCEPTION FOR MEDICAL EXPENSES INCURRED FOR GENERAL HEALTH

MAY BE DEDUCTIBLE IF SERVICES ARE PRESCRIBED BY A PHYSICIAN WHO PROVIDES A WRITTEN STATEMENT THAT THEY ARE NECESSARY TO ALLEVIATE PHYSICAL, MENTAL DEFECT OR ILLNESS

THE COST OF INPATIENT CARE INCLUDING MEALS AND LODGING. ARE THEY DEDUCTIBLE

YES THEY ARE DEDUCTIBLE AS A MEDICAL EXPENSE IF THE PRINCIPAL REASON AN INDIVIDUAL IS IN AN INSTITUTION OTHER THAN A HOSPITAL IS THE NEED FOR

MEDICAL CARE BY THE INSTITUTION, THE FULL COSTS OF MEALS, LODGING AND SERVICES NECESSARY FOR FURNISHING THE MEDICAL CARE ARE ALL DEDUCTIBLE

ASIDE FROM INSULIN ONLY _______ THAT REQUIRE A PRESCRIPTION ARE _____

MEDICINE AND DRUGS ARE QUALIFIED MEDICAL EXPENSES IF THEY REQUIRE A PRESCRIPTION.

CAPITAL EXPENDITURE MEDICAL EXPENSES

1. EYEGLASSES OR CONTACT LENSES

2. GUIDE DOG

3. WHEELCHAIRS, CRUTCHES, ARTIFICAL LIMBS

4. SPECIAL BEDS

5. AIR CONDITIONING

6. DEHUMIDFYING EQUIPMENT

EXPENDITURES FOR A NEW BUILDING CONSTRUCTION OR FOR A PERMANENT IMPROVEMENTS TO EXISITING STRUCTURES PRIMARILY FOR

MEDICAL CARE MAY BE DEDUCTIBLE IN PART AS A MEDICAL EXPENSE.

EXPENDITURES FOR A NEW BUILDING FOR MEDICAL CARE MAY BE DEDUCTIBLE AS A MEDICAL EXPENSE. HOW DO YOU CALCULATE THE MEDICAL EXPENSE PART

COST OF PERMANENT IMPROVEMENT MINUS VALUE INCREASE IN PROPERTY EQUALS DEDUCTIBLE MEDICAL EXPENSE PART. YOU CAN ADD MAINTENANCE AND REPAIRS TO THE DEDUCTION

EXPENDITURES FOR A NEW BUILDING FOR MEDICAL CARE MAY BE DEDUCTIBLE AS A MEDICAL EXPENSE. WHEN CALCULATING THE MEDICAL EXPENSE PART WHAT HAPPENS TO THE COST OF CAPITAL ASSET?

CAPITAL ASSET COST IS NOT DEDUCTIBLE, THE COST OF OPERATING AND MAINTAINING THE ASSET MAY BE DEDUCTIBLE WHEN THE ASSET IS OPERATED PRIMARILY FOR MEDICAL CARE

EXPENDITURES FOR A NEW BUILDING FOR MEDICAL CARE MAY BE DEDUCTIBLE AS A MEDICAL EXPENSE. WHAT ABOUT THE CONSTRUCTION OF CERTAIN THINGS TO BE MORE DISABILITY ACCESSIBLE?

1. ENTRANCE OR EXIT RAMPS

2. INSTALLATION OF ELEVATORS

3. WIDENING OF DOORWAYS

4. LOWERING KITCHEN CABINETS OR EQUPMENT

MAY QUALIFY AS A MEDICAL EXPENSE

EXPENDITURES FOR A NEW BUILDING FOR MEDICAL CARE MAY BE DEDUCTIBLE AS A MEDICAL EXPENSE. WHAT IS ANOTHER TERM FOR IT?

CAPITAL IMPROVEMENT WHEN THERE IS AN IMPROVEMENT

amount paid for travel for essential and primarily for medical care. are they deductible?

YES. THIS INCLUDES TRANSPORTATION COST OF TRAVELING TO A WARM CLIMATE ON A DRS ORDER TO ALLEVIATE A SPECIFIC CHRONIC AILMENT

AMOUNTS PAID TO TRAVEL FOR MEDICAL CARE ARE DEDUCTIBLE. WHAT OPTIONS DOES THE TAXPAYER HAVE ON WAYS TO DEDUCT?

MAY CHOOSE BETWEEN ACTUAL EXPENDITURES (TAXI’S, AIRFAIRES ECT) OR .21 CENTS PER MILE PLUS TOLLS AND PARKING

EXPENDITURES FOR LODGING ARE DEDUCTIBLE FOR MEDICAL CARE. WHAT IS THE MAX PER NIGHT. ALSO WHAT ABOUT COST OF MEALS

$50 PER NIGHT PER INDIVIDUAL FOR LODGING EXPENSES. COST OF MEALS IS NOT DEDUCTIBLE

INSURANCE PREMIUMS PAID FOR MEDICAL INSURANCE THAT PROVIDES FOR REIMBURSEMENT OF MEDICAL CARE EXPENSES.

1. ARE THEY DEDUCTIBLE?

2. WHAT PREMIUMS ARE NOT DEDUCTIBLE

3. WHAT ABOUT PREMIUMS PAID FOR MEMBERSHIP IN AN ASSOCIATION THAT GIVES COOPERATIVE (FREE CHOICE) MEDICAL SERVICES

1. YES DEDUCTIBLE

2. Premiums paid for a policy that simply pays you a fixed amount per week while you're sick or hospitalized are NOT deductible as medical expenses.

3. YES THEY ARE DEDUCTIBLE

MEDICARE ITEMIZED DEDUCTION. WHAT IS DEDUCTIBLE VS NOT

BASIC COST OF MEDICARE INSURANCE, MEDICARE PART A, IS NOT DEDUCTIBLE UNLESS VOLUNTARILY PAID BY THE TAXPAYER FOR COVERAGE. THE EXTRA COST OF MEDICARE (PART B) IS DEDUCTIBLE

IF DECEDENTS OWN MEDICAL EXPENSES ARE PAID BY THEIR ESTATE WITHIN 1 YEAR OF THE DECEDENTS DEATH, WHO REPORTS THE EXPENSE

EITHER. THE EXPENSES MAY BE DEDUCTED ON THE DECEDENTS TAX RETURN FOR YEAR INCURRED. ALTERNATIVELY THE ESTATE CAN DEDUCT MEDICAL EXPENSES AS A CLAIM AGAINST THE ESTATE FOR FEDERAL ESTATE TAX PURPOSES

AMOUNT PAID BY AN ADOPTING PARENT FOR MEDICAL EXPENSES RENDERED TO ADOPTED CHILD BEFORE CHILDS PLACEMENT IN PARENTS HOME

IS A MEDICAL EXPENSE PROVIDED IT MEETS THE REQUIREMENTS

REQUIREMENTS FOR ADOPTED CHILD’S MEDICAL EXPENSES BEFORE PLACEMENT IN PARENTS HOME TO QUALIFY AS A MEDICAL EXPENSE DEDUCTION

1. CHILD QUALIFIES AS DEPENDENT OF ADOPTING PARENT AT THE TIME MEDICAL SERVICES ARE RENDERED OR AT THE TIME THE FEES ARE PAID

2. ADOPTING PARENT CAN CLEARLY SUBSTANTIATE DEDUCTION CLAIMED IS DIRTECTLY ATTRIBUTABLE TO MEDICAL CARE OF CHILD

3. MEDICAL EXP ARE PAID BY ADOPTING PARENT OR AGENT FOR MEDICAL CARE OF CHILD. REIMBURSED EXPENSES ARE NONDEDUCTIBLE

TAXPAYER WHO ITEMIZES CAN DEDUCT FULL AMOUNT OF CERTAIN TAXES THAT ARE PAID AND INCURRED DURING TAX YEAR SUBJECT TO THE __ LIMIT OR __ FOR MFS LIMIT ON TOTAL STATE AND LOCAL TAXES. IF MAGI IS MORE THAN__ OR __ FOR MFS THE __ DEDUCTION PHASES OUT REACHING FULL PHASEOUT AT __ OR __ FOR MFS. DEDUCTION DOES NOT PHASE OUT BELOW __

TAXPAYER WHO ITEMIZES CAN DEDUCT FULL AMOUNT OF CERTAIN TAXES THAT ARE PAID AND INCURRED DURING TAX YEAR SUBJECT TO THE 40K LIMIT OR 20K FOR MFS LIMIT ON TOTAL STATE AND LOCAL TAXES. IF MAGI IS MORE THAN 500K OR 250K FOR MFS THE 40K DEDUCTION PHASES OUT REACHING FULL PHASEOUT AT 600K OR 300K FOR MFS. DEDUCTION DOES NOT PHASE OUT BELOW 10K

STATE AND LOCAL REAL PROPERTY TAXES ARE DEDUCTIBLE BY THE PERSON WHO

THE PROPERTY IS OWNED BY AND THE YEAR IN WHICH THEY WERE PAID

STATE AND LOCAL REAL PROPERTY TAXES: WHAT IF REAL PROPERTY IS BOUGHT OR SOLD DURING THE YEAR

WHO OWNS PROPERTY ON DATE OF SALE

REAL PROP TAX IS ALLOCATED BETWEEN BUYER AND SELLER ON BASIS OF THE NUMBER OF DAYS EACH ONE HELD THE PROPERTY DURING THE REAL PROPERTY TAX YEAR.

PURCHASER IS PRESUMED TO OWN THE PROPERTY ON THE DATE OF SALE.

ANY TAXES PAID BY AN OWNER (EX PURCHASER) FOR A PERIOD IN WHICH SOMEONE ELSE OWNED (EX SELLER) THE PROPERTY, ARE NOT DEDUCTIBLE BUT ARE ADDED TO THE BASIS OF THE PROPERTY

STATE AND LOCAL REAL PROPERTY TAXES: TAXES PAID TO A FINANCIAL INSTITUTION AND HELD IN ESCROW. ARE THEY DEDUCTIBLE?

yes, when the financial institution pays the funds over to the taxing body

STATE AND LOCAL REAL PROPERTY TAXES: SERVICE CHARGES FOR POLICE AND FIRE PROTECTION. DEDUCTIBLE?

YES IF THE FUNDS ARE PAID INTO A GENERAL REVENUE FUND

STATE AND LOCAL REAL PROPERTY TAXES: SPECIAL ASSESSMENTS FOR LOCAL IMPROVEMENTS. IS IT DEDUCTIBLE?

NO BUT IT DOES INCREASE THE BASIS OF THE PROPERTY

STATE AND LOCAL REAL PROPERTY TAXES: WHAT ABOUT FOREIGN REAL PROP TAXES?

NO DEDUCTION

STATE AND LOCAL AD VALOREM AND PERSONAL PROPERTY TAXES ARE DEDUCTIBLE ONLY IF

THE TAX IS

1. ACTUALLY IMPOSED

2. IMPOSED ON AN ANNUAL BASIS

3. SUBSTANTIALLY IN PROPORTION TO THE VALUE OF THE PROPERTY

REGISTRATION OR LICENSING OF VEHICLES IS DEDUCTIBLE IF

TAX IS BASED ON THE VALUE OF VEHICLE, ACTUALLY IMPOSED AND IMPOSED ON ANNUAL BASIS

FOREIGN INCOME TAXES PAID ARE DEDUCTIBLE UNLESS

FOREIGN TAX CREDIT IS CLAIMED

INDIVIDUAL TAXPAYERS MAY CLAIM AN ITEMIZED DEDUCTION FOR GENERAL STATE AND LOCAL SALES TAXES IN LIEU OF ___

TAXPAYERS CAN DEDUCT EITHER

1. STATE INCOME TAX

2. ACTUAL SALES TAX AMOUNTS OR PREDETERMINED AMOUNT FROM AN IRS TABLE

ARE ESTATE TAXES DEDUCTIBLE

NO

ARE GIFT TAXES DEDUCTIBLE

NO

ARE INHERITANCE TAXES DEDUCTIBLE

NO

ARE LEGACIES AND SUCCESSION TAXES DEDUCTIBLE

NO

WHEN MIGHT A DEDUCTION BE AVAILABLE FOR AN ESTATE TAX RETURN FOR INCOME TAXES

WHEN IT IS PAID ON ACCOUNT OF DECEDENT

ARE STATE TAXES ON: CIGARETTES, TOBACCO, ALCOHOL, GAS, LICENSING/REGISTRATION, ESTATES, GIFTS, INHERITANCES, LEGACIES AND SUCCESSIONS DEDUCTIBLE

NO

ARE LICENSING/REGISTRATION FEES OF HIGHWAY MOTOR VEHICLES DEDUCTIBLE IF BASED ON WEIGHT INSTEAD OF VALUE OF VEHICLE

NO

IS SALES TAX ON BUSINESS PROPERT DEDUCTIBLE

NO. BUT IT IS ADDED TO THE BASIS OF THE ACQUIRED PROPERTY

CAN PERSONAL INTEREST BE DEDUCTED

NO

WHAT IS CONSIDERED PERSONAL INTEREST

1. CREDIT CARD DEBT

2. REVOLVING CHARGE ACCOUNTS

3. LINES OF CREDITS

4. CAR LOANS

5. MEDICAL FEES AND PREMIUMS

6. HOME ACQUISITION DEBT GREATER THAN THE ALLOWED DEDUCTION LIMIT

7. UNDERPAYMENT TAX LIABILITIES

WHAT IS NOT CONSIDERED PERSONAL INTEREST

1. INTEREST ON TRADE OR BIZ DEBT

2. INVESTMENT INTEREST

3. PASSIVE ACTIVITY INTEREST

4. QUALIFIED RESIDENCE INTEREST

5. INTEREST ON UNPAID PORTION OF CERTAIN ESTATE TAXES

6. STUDENT LOAN INTEREST

IRC ALLOWS THE DEDUCTION OF A LIMITED AMOUNT OF INVESTMENT INTEREST AS AN

ITEMIZED DEDUCTION

INVESTMENT INTEREST IS INTEREST PAID OR INCURRED ON DEBT TO

PURCHASE OR CARRY PROPERTY HELD FOR INVESTMENT

INVESTMENT INTEREST INCLUDES THE FOLLOWING:

1. INTEREST ALLOCABLE TO THE PORTFOLIO INCOME UNDER THE PAL RULES

• PASSIVE ACTIVITY INTEREST IS INCLUDIBLE WITH PASSIVE ACTIVITES AND DEDUCTIBLE WITHIN THE PASSIVE LOSS RULES

2. ANY INTEREST DERIVED FROM AN ACTIVITY INVOLVING A TRADE OR BIZ IN WHICH TP DOES NOT MATERIALLY PARTICIPATE AND WHICH IS NOT TREATED AS PASSIVE ACTIVITY UNDER PAL RULES

3. ANY DEDUCTIBLE AMOUNT IN CONNECTION WITH PRESONAL PROPERTY USED IN A SHORT SALE

INVESTMENT INTEREST DOES NOT INCLUDE

1. QUALIFIED RESIDENCE INTEREST

2. INTEREST FOR GENERATING TAX EXEMPT INCOME

3. PASSIVE ACTIVITY INTEREST

INVESTMENT INTEREST: WHAT IS THE LIMIT

ONLY TO THE EXTENT OF NET INVESTMENT INCOME

HOW TO CALCULATE NET INVESTMENT INCOME

INVESTMENT INCOME MINUS INVESTMENT EXPENSES OTHER THAN INTEREST EXPENSE

INVESTMENT INCOME DEFINITON AND EXAMPLES

NONTRADE OR NONBIZ INCOME FROM

1. INTEREST

2. DIVIDENDS (NOT SUBJECT TO CAPITAL GAINS TAX)

3. RENTS

4. ROYALTIES AND OTHER GROSS INCOME FROM PROPERTY HELD FOR INVESTMENT

INVESTMENT INCOME: NET GAIN ON DISPOSITION OF PROPERTY HELD FOR INVESTMENT

TP MAY ELECT TO TREAT ALL OF A PORTION OF LONG TERM CAPITAL GAINS AND QUALIFIED DIVIDENDS AS INVESTMENT INCOME

INVESTMENT INCOME: IS INCOME TREATED AS GROSS PORTFOLIO INCOME UNDER

THE PAL RULES

INVESTMENT INCOME: IS INCOME FROM INTERESTS IN ACTIVITIES THAT INVOLVE

A TRADE OR BIZ IN WHICH THE TP DOES NOT MATERIALLY PARTICIPATE IF THE ACTIVITY IS NOT TREATED AS PASSIVE ACTIVITY UNDER THE PAL RULES

INVESTMENT INCOME: DOES NOT INCLUDE INCOME FROM A RENTAL REAL ESTATE ACTIVITY IN WHICH

THE TP MATERIALLY PARTICIPATES.

INVESTMENT INCOME: DISALLOWED INVESTMENT INTEREST IS CARRIED

FORWARD INDEFINITELY. IT IS DEDUCTIBLE TO THE EXTENT OF INVESTMENT INCOME IN FUTURE TAX YEARS

QUALIFIED RESIDENCE INTEREST: DEDUCTION LIMIT

NO MORE THAN 750K (375K MFS) OF THE SUM OF ACQUISITION AND HOME EQUITY INDEBTEDNESS. FOR QUALIFYING DEBT TAKEN OUT ON OR BEFORE 12/15/2017 TP CAN ONLY DEDUCT HOME INTEREST OF 1 MILLION OR 500K MFS OF THAT DEBT

WHAT IS QUALIFIED RESIDENCE INTEREST

INTEREST PAID OR ACCRUED DURING TAX YEAR ON ACQUISITION OR HOME EQUITY INDEBTEDNESS THAT IS SECURED BY A QUALIFIED RESIDENCE (1098)

QUALIFIED RESIDENCE INTEREST: CAN MINISTERS AND MILITARY PERSONNEL DEDUCT MORTGAGE INTEREST ON THEIR HOMES EVEN WHEN THEY RECEIVE AN ALLOWANCE

YES THEY CAN STILL DEDUCT EVEN IF ALLOWANCE IS EXCLUDED FROM INCOME

QUALIFIED RESIDENCE REQUIREMENTS

1. PRINCIPAL RESIDENCE OF TAXPAYER

2. USED FOR PERSONAL PURPOSES FOR THE GREATER OF 14 DAYS OR 10% OF THE NUMBER OF DAYS DURING THE YEAR IN WHICH IT IS RENTED

WHAT IF A TAXPAYER HAS MORE THAN 2 RESIDENCES IN THE TAX YEAR IN REGARDS TO QUALIFIED RESIDENCE INTEREST

MAY SELECT THE RESIDENCES USED TO DETERMINE THE AMOUNT OF QUALIFIED RESIDENCE INTEREST

ACQUISITION DEBT DEFINITION

DEBT INCURRED IN ACQUIRING, CONSTRUCTING OR SUBSTANTIALLY IMPROVING A QUALIFIED RESIDENCE. THE DEBT MUST BE SECURED BY SUCH RESIDENCE

ACQUISITION DEBT- ANY DEBT THAT IS REFINANCED IS TREATED AS

ACQUISITION DEBT TO THE EXTENT THAT IT DOES NOT EXCEED THE PRINCIPAL AMOUNT OF ACQUISITION DEBT IMMEDIATELY BEFORE REFINANCING

HOME EQUITY INDEBTEDNESS DEFINTION AND WHAT HAPPENS BEGINNING IN 2018

ALL DEBT OTHER THAN ACQUISITION DEBT THAT IS SECURED BY THE QUALIFIED RESIDENCE. BEGINNING IN 2018 HOME EQUITY DEBT MUST BE USED TO BUY, BUILD OR SUBSTANTIALLY IMPROVE QUALIFIED RESIDENCE. THIS MEANS THE PRIOR ALLOWANCE TO USE THE FUNDS FOR OTHER PERSONAL EXPENSES SUCH AS COLLEGE TUITION IS SUSPENDED

INTEREST ON A QUALIFIED RESIDENCE IS DEDUCTIBLE IF

IT IS INCURRED ON ACQUISITION DEBT OR HOME EQUITY INDEBTEDNESS USED TO BUY, BUILD, OR SUBSTANTIALLY IMPROVE THE RESIDENCE.

HOME EQUITY INDEBTEDNESS CANNOT EXCEED

THE FMV OF THE RESIDENCE REDUCED BY ANY ACQUISITION INDEBTEDNESS.

MAXIMUM HOME EQUITY INDEBTEDNESS = PROPERTY FMV MINUS ACQUISITION INDEBTEDNESS

POINTS PAID BY THE BORROWER WITH RESPECT TO A HOME MORTGAGE ARE PREPAID INTEREST WHICH IS TYPICALLY

DEDUCTIBLE OVER THE TERM OF THE LOAN

AMOUNTS PAID AS POINTS MAY BE DEDUCTED IN YEAR PAID IF

1. LOAN IS USED FOR THE 3 REASONS (BUY, IMPROVE AND IS SECURED BY THAT HOME)

2. SETTLEMENT CLEARLY DESIGNATES THE POINTS OR LOAN ORIGINATION FEES

3. POINTS ARE COMPUTED AS A PERCENTAGE OF THE PRINCIPAL LOAN AMOUNT

4. PAYMENTS OF POINTS IS AN ESTABLISHED BIZ PRACTICE IN AREA WHERE LOAN IS MADE

5. POINTS PAID DO NOT EXCEED POINTS GENERALLY CHARGED IN THE AREA

POINTS PAID TO A REFINANCE A MORTGAGE. ARE THEY DEDUCTIBLE?

NOT DEDUCTIBLE EVEN IF NEW MORTGAGE IS SECURED BY TAXPAYERS MAIN HOME

POINTS PAID BY THE SELLER ARE SELLING EXPENSES THAT REDUCE THE

AMOUNT REALIZED ON THE SALE. THE PURCHASER CAN ELECT TO DEDUCT POINTS ON THE ACQUISITION INDEBTEDNESS OF A PRINCIPAL RESIDENCE BY REDUCING THE BASIS BY THE AMOUNT OF THE POINTS

POINTS PAID- TO COMPUTE INTEREST DEDUCTIONS, INDIVIDUALS MUST

CLASSIFY INTEREST EXPENSES AS

1. Investment interest

2. Personal interest

3. Trade or business interest

4. Portfolio interest

How do you know which type?
FOLLOW THE MONEY. Trace where the borrowed money (debt proceeds) was spent. The interest is classified based on what the borrowed money was used for.

ARE CHARITABLE CONTRIBUTIONS DEDUCTIBLE? WHAT FORM CAN THE DONATION BE? WHAT MUST BE TRANSFERRED TO THE QUALIFIED ORGANIZATION?

YES ONLY IF THEY ARE MADE TO A QUALIFIED ORGANIZATION. DONATIONS CAN BE MADE IN THE FORM OF CASH OR NONCASH PROPERTY. ALL RIGHTS AND INTEREST TO THE DONATION MUST BE TRANSFERRED TO THE QUALIFIED ORGANIZATION.

WHAT YEAR IS A CHARITABLE CONTRIBUTION ALLOWED

YEAR THE CONTRIBUTION IS PAID INCLUDING AMOUNTS CHARGED TO A BANK CREDIT CARD

CHARITABLE CONTRIBUTIONS- VALUE OF ANY PROPERTY DONATED IS EQUAL TO

1. FMV

2. THE LOWER OF FMV OR DONORS ADJUSTED BASIS

DEPENDING ON THE TYPE OF PROPERTY AND ELECTIONS

CHARITABLE CONTRIBUTIONS- DEDUCTION IS GENERALLY LIMITED TO

50% OR 60% FOR CASH CONTRIBUTIONS OF THE TAXPAYERS AGI HOWEVER SOMETIMES THE LIMIT IS 30% OR 20%

FOR CHARITABLE CONTRIBUTIONS, WHAT IS CONSIDERED A QUALIFIED ORGANIZATION

CAN EITHER BE PUBLIC CHARITIES OR PRIVATE FOUNDATIONS.

WHAT IS A PUBLIC CHARITY

ONE THAT DERIVES MORE THAN 1/3 OF ITS SUPPORT FROM ITS MEMBERS AND THE GENERAL PUBLIC

FOR CHARITABLE CONTRIBUTIONS, WHAT REQUIREMENTS MUST THE DONOR MEET?

1. CLOTHING AND HOUSEHOLD ITEMS DONATED MUST BE IN GOOD OR BETTER CONDITION, EXCEPTION IS THAT A SINGLE ITEM DONATION IN LESS THAN GOOD CONDITION WITH A MORE THAN $500 VALUE IS DEDUCTIBLE WITH A QUALIFIED APPRAISAL. THIS LOWER $500 RULE FOR CLOTHING AND HOUSEHOLD ITEMS IS AN EXCEPTION TO THE HIGHER $5K RULE

2. CASH OR CASH EQUIVALENT DONATIONS REQUIRE A BANK RECORD OR RECEIPT, LETTER FROM THE DONEE ORGANIZATION REGARDLESS OF THE AMOUNT

3. DONATIONS OF $250 OR MORE REQUIRE SUBSTANTIATION BY A CONTEMPORANEOUS WRITTEN RECEIPT FROM THE ORGANIZATION (BANK RECORDS ALONE IS INSUFFICIENT

RECEIPT REQUIREMENTS FOR CHARITABLE CONTRIBUTIONS

1. BE WRITTEN

2. STATE NAME OF ORGANIZATION

3. STATE WHETHER QUALIFIED ORGNANIZATION GAVE DONOR ANY GOODS OR SERVICES AS A RESULT OF CC

4. BE OBTAINED ON OR BEFORE THE EARLIER OF THE DATE THE TAX RETURN IS FILED OR THE DATE, INCLUDING EXTENSIONS FOR FILING THE RETURN

IF DONATION FOR CC IS IN FORM OF PROPERTY, THE AMOUNT OF THE DONATION DEPENDS UPON THE

TYPE OF PROPERTY AND TYPE OF ORGANIZATION THAT RECEIVES THE PROPERTY

WHAT IS A CAPITAL GAIN PROPERTY

PROPERTY ON WHICH A LONG TERM CAPITAL GAIN WOULD BE RECONGIZED IF IT WERE SOLD ON THE DATE OF THE CONTRIBUTION

ORDINARY INCOME PROPERTY DEFINITION

PROPERTY ON WHICH ORDINARY INCOME OR SHORT TERM (HELD A YEAR OR LESS) CAPITAL GAIN WOULD BE RECONGIZED IF IT WERE SOLD ON THE DATE OF THE CONTRIBUTION

CHARITABLE CONTRIBUTIONS - WHEN MUST A 8282 DONEE INFORMATION RETURN BE FILED

IF THE ORGANIZATION DISPOSES OF THE DONATED PROPERTY (VALUED AT $500 OR MORE) WITHIN 3 YEARS OF ACQUISITION. MUST BE FILED WITHIN 125 DAYS AND PROVIDE A COPY TO DONOR

WHEN MUST A DONEE ORGANIZATION SEND A FORM 1098C CONTRIBUTIONS OF MOTOR VEHICLES BOATS AND AIRPLANES TO THE DONOR?

IF AN ORGANIZATION SELLS A QUALIFIED DONATED VEHICLE. MUST SEND TO DONOR WITHIN 30 DAYS OF SALE IN ORDER FOR THE DEDUCTION TO EXCEED $500

QUALIFIED APPRAISAL FOR NONCASH OR TRADED SECURITY PROPERTY DONATIONS IS REQUIRED TO BE ATTACHED TO THE TAX RETURN FOR PROPERTY VALUED OVER

5K

ANY DEDUCTIONS ON NONCASH CONTRIBUTIONS IN EXCESS OF $500 MUST BE REPORTED ON

FORM 8283 NONCASH CHARITABLE CONTRIBUTIONS

WHAT ARE THE 2 TYPES OF CHARITABLE ORGANIZATIONS

50% LIMIT ORGANIZATIONS AND ALL OTHERS ARE NON 50% LIMIT ORGANIZATIONS

WHAT ORGANIZATIONS ARE 50% LIMIT ORGANIZATIONS

1. CHURCHES

2. EDUCATIONAL ORGANIZATIONS

3. HOSPITALS AND CERTAIN MEDICAL RESEARCH ORGANIZATIONS

4. ORGANIZATIONS THAT ARE OPERATED ONLY TO RECEIVE, HOLD, INVEST AND ADMINISTER PROPERTY AND TO MAKE EXPENDITURES TO OR FOR THE BENEFIT OF THE STATE AND MUNICIPAL COLLEGES AND UNIVERSITIES

5. THE UNITES STATES OR ANY STATE, DISTRICT OF COLUMBIA, A US POSSESSION INCLUDING PR,A POLITICAL SUBDIVISION OF A STATE OR US POSSESSION OR A NATIVE AMERICAN TRIBAL GOVERNMENT

6. PRIVATE OPERATING FOUNDATIONS

7. PRIVATE NONOPERATING FOUNDATIONS THAT MAKE QUALIFYING DISTRIBUTIONS OF 100% OF CONTRIBUTIONS WITHIN 2.5 MONTHS FOLLOWING THE YEAR THEY RECEIVE THE CONTRIBUTION

NONLIMIT 50% ORGANIZATIONS ARE PRIMARILY COMPOSED OF

OTHER PRIVATE ORGANIZATIONS. CHARITABLE CONTRIBUTIONS ARE SUBJECT TO LIMITATIONS

NONLIMIT 50% ORGANIZATIONS CC DEDUCTION LIMIT

50% (60% FOR CASH CONTRIBUTIONS) OF AGI, BUT CERTAIN CONTRIBUTIONS MAY BE INDIVIDUALLY LIMITED TO 30% OR 20% OF AGI DEPENDING ON TYPE OF CONTRIBUTION. ANY DONATION THAT EXCEEDS THE LIMITATION CAN BE CARRIED FORWARD AND DEDUCTED IN THE NEXT 5 TAX YEARS

REGULAR 30% LIMITATION DEFINITION

APPLIES TO GIFTS TO ALL QUALIFIED CHARITABLE ORGANIZATIONS OTHER THAN 50%| LIMIT ORGANIZATIONS HOWEVER IS CAPITAL GAIN PROPERTY IS DONATED IT MAY BE SUBJECT TO THE 20% LIMITATIONS

SPECIAL 30% LIMITATION FOR CAPITAL GAIN PROPERTY

APPLIES TO GIFTS OF CAPITAL GAIN PROPERTY GIVEN TO 50% LIMIT ORGANIZATIONS BUT IS ONLY APPLICABLE IF THE DONOR ELECTS NOT TO REDUCE THE FMV OF DONATED PROPERTY BY THE AMOUNT THAT WOULDVE BEEN LONG TERM CAPITAL GAIN IF HE HAD SOLD THE PROPERTY. IF DEDUCTION IS ELECTED THEN ONLY THE 50% (60% FOR CASH CONTRIBUTIONS) LIMITATION APPLIES.

20% LIMITATION APPLIES TO

CAPITAL GAIN PROPERTY DONATED TO NON 50% LIMIT CHARITIES. THE LIMIT IS ACTUALLY THE LESSER OF 20% AGI OR 30% OF AGI MINUS CAPITAL GAIN CONTRIBUTIONS TO PUBLIC CHARITIES

IN ACCOUNTING FOR THE DIFFERENT LIMITATIONS WHAT IS THE ORDER IN WHICH EACH IS CONSIDERED

50% (60% FOR CASH CONTRIBUTIONS)

30%

20%

IN CARRYING OVER EXCESS CONTRIBUTIONS TO FUTURE TAX YEARS THE EXCESS MUST BE

CARRIED OVER IN THE SAME LIMITATION CATEGORIES