Q1) List a dozen above the line deductions and explain the rule regarding moving expenses. List 7 itemized deductions from schedule A.
Above the line deductions:
a) Educators expenses
b) Certain business expenses of reservists, performing artists, etc.
c) Health savings account deduction
d) Moving expenses
e) Deductible part of self-employment tax
f) Self-employed SEP, SIMPLE, and qualified plans
g) Self-employed health insurance deduction
h) Penalty on early withdrawal of savings
i) Alimony paid
j) IRA deduction
k) Student loan interest deduction
l) Tuition and fees deduction
m) Domestic production activities deduction
n) Jury duty ...view middle of the document...
e) Moving expenses may be deducted in the year in which they were incurred even if the 39 or 78 week employment requirement has not yet been satisfied.
* If the time requirements are subsequently not met, an amended return must be filed or the amount of the deduction must be reported as gross income in the following year.
4) Direct expenses
a) Direct expenses are deductible to arrive at AGI.
b) Include the expenses of actually moving a taxpayer and his/her household goods and personal effects and travel from the former residence to new residence.
* Instead of actual expenses, mileage rates of $.19 per mile through June 30 and $.235 per mile afterwards in 2011 can be used for driving one’s own automobile.
* The cost of meals en route is not deductible as a direct moving expense.
* Expenses incurred by members of the taxpayer’s household are deductible.
5) Indirect expenses:
a) Indirect expenses are not deductible.
b) Include house hunting; temporary living expenses and expenses related to the sale, purchase or lease of a residence.
Q2) Explain how much can be claimed as a Medical and Dental Expense, what qualifies for the deduction, and the types of medical expenses that are deductible.
Amounts paid for qualified medical expenses that exceed 7.5% can be claimed as a medical and dental expense.
To qualify for a deduction, an expense must be paid during the taxable year for the taxpayer, the taxpayer’s spouse or a dependent and must not be compensated for by insurance or otherwise during the taxable year.
Deductible medical expenses are amounts paid for;
* Diagnosis, cure, mitigation, treatment, or prevention of disease or for the purpose of affecting any structure or function of the body
* Transportation primarily for and essential to medical care
* Medical insurance
* Qualified long term care premiums and services
The cost of in-patient hospital care including meals and lodging is deductible as a medical expense.
Only drugs that require a prescription are qualified medical expenses. The following are also considered deductible medical expenses:
* A guide dog
* Wheelchair, crutches, artificial limbs
* Special beds
* Air conditioning
* Dehumidifying equipment
Expenditures for new building construction or for permanent improvements to existing structures may be deductible in part.
* The excess of the cost of a permanent improvement over the increase in value of the property is a deductible medical expense
* Construction of ramps for the disabled installation of elevators, widening of doorways, lowering of kitchen cabinets or equipment may each qualify.
Amounts paid for transportation essential to medical care are deductible and premiums paid for medical insurance that provides for reimbursement of medical care expenses are deductible.
Q3) Describe the donation requirements for charitable contributions. What is the difference...