Question 1

A review of the 2019 tax file of Gregory,a single taxpayer who is age 40,provides the following information regarding Gregory's 2019 tax status: $$\begin{array} { | l | r | } 
\hline \text { Adjusted gross income } & \$ 40,000 \
\hline \text { Medical expenses (before percentage limit) } & 5,000 \
\hline \text { Itemized deductions other than medical } & 12,000 \
\hline 2019 \text { potential standard deduction } & 12,200 \
\hline
\end{array}$$ In 2020,Gregory receives a reimbursement for last year's medical expenses of $1,200.As a result,Gregory must
A)include $800 in gross income for 2020.
B)include $1,200 in gross income for 2020.
C)reduce 2020's medical expenses by $1,200.
D)amend the 2019 return.

Accepted Answer

Gregory originally deducted $5,000 in medical expenses, but only the amount exceeding 10% of his AGI ($4,000) was deductible. Thus, $1,000 was deducted. Receiving a $1,200 reimbursement means $800 of the previously deducted amount must be included in 2020's gross income.

Question 2

Mr.and Mrs.Thibodeaux (both age 35),who are filing a joint return,have adjusted gross income of $90,000 in 2019.During the tax year,they paid the following medical expenses for themselves and for Mrs.Thibodeaux's mother,Mrs.Watson (age 63).Mrs.Watson provided over one-half of her own support. $\begin{array}{|l|l|}
\hline \text { Prescription drugs for } \mathrm{Mr} & \
\text { Thibodeaux } & \$ 3,600\\hline \text { General vitamins for Mrs. } & \
\text { Thibodeaux } & \$ 100 \\hline \text { Doctor bill for Mr. Thibodeaux } & \$ 1,800 \\hline \text { Doctor bill for Mrs. Thibodeaux } & \$ 4,000 \
\hline \text { Hospital bill for Mrs. Watson } & \$ 2,200\
\hline 
\end{array}$ Mr.and Mrs.Thibodeaux received no reimbursement for the above expenditures.What is the amount of their deductible itemized medical expenses?
A)$400
B)$500
C)$2,600
D)$9,400

Accepted Answer

The answer of Mr.and Mrs.Thibodeaux (both age 35),who are filing...

Question 3

Matt paid the following taxes this year: $$\begin{array} { | l | r| } 
\hline \text { Real estate taxes on his own residence } & \$ 3,600 \
\hline \text { State income taxes } & 900 \
\hline \text { Local city income taxes } & 300 \
\hline \text { State salestaxes } & 1,400 \
\hline
\end{array}$$ What is the maximum amount Matt can deduct as an itemized deduction on his tax return?
A)$6,200
B)$5,000
C)$5,300
D)$4,800

Accepted Answer

The answer of Matt paid the following taxes this year:...

Question 4

Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.

Accepted Answer

Self-employed individuals can deduct only the employer-equivalent portion of the self-employment tax as an above-the-line deduction, not the full amount.

Question 5

In 2019,Carlos filed his 2018 state income tax return and paid taxes of $800.Also in 2019,Carlos's employer withheld state income tax of $750 from Carlos's salary.In 2020,Carlos filed his 2019 state income tax return and paid an additional $600 of state income tax due for 2019.How much state income tax can Carlos deduct on his 2019 federal income tax return for state income tax?
A)$1,350
B)$1,400
C)$1,550
D)$2,150

Accepted Answer

The answer of In 2019,Carlos filed his 2018 state income...

Question 6

Alan,who is a security officer,is shot while on the job.As a result,Alan suffers from a chronic leg injury and must use a wheelchair and undergo therapy to regain and retain strength.Alan's physician recommends that he install a whirlpool bath in his home for therapy.During the year,Alan makes the following expenditures: $$\begin{array} { | l | r | } 
\hline \text { Wheelchair } & \$ 1,200 \
\hline \text { Whirlpool bath } & 2,000 \
\hline \text { Maintenance of the whirlpool } & 250 \
\hline \text { Increased utility bills associated with whirlpool } & 450 \
\hline \text { Entrance ramp, various home modifications } & 7,200 \
\hline
\end{array}$$ A professional appraiser tells Alan that the whirlpool has increased the value of his home by $1,000.Alan's deductible medical expenses (before considering limitations based on AGI)will be
A)$6,000.
B)$10,100.
C)$7,000.
D)$7,700.

Accepted Answer

Alan's deductible medical expenses (before considering limitations based on AGI) are $10,100. This includes the cost of the wheelchair, whirlpool bath, maintenance of the whirlpool, increased utility bills associated with the whirlpool, and entrance ramp and various home modifications. The value of the whirlpool bath that increased the value of his home is not deductible.

Question 7

Caleb's 2019 medical expenses before reimbursement for the year include the following: $$\begin{array} { | l | r | } 
\hline \text { Medical premiums } & \$ 11,000 \
\hline \text { Doctors, hospitals } & 3,500 \
\hline \text { Prescriptions } & 600 \
\hline
\end{array}$$ Caleb's AGI for the year is $50,000.He is single and age 58.Caleb also receives a reimbursement for medical expenses of $1,000.Caleb's deductible medical expenses that will be added to the other itemized deduction will be
A)$10,350.
B)$9,100.
C)$14,100.
D)$10,100.

Accepted Answer

Caleb's total medical expenses are $15,100 ($11,000 + $3,500 + $600). After the $1,000 reimbursement, the expenses are $14,100. The deductible amount is the excess over 7.5% of AGI, which is $3,750 (7.5% of $50,000). Therefore, the deductible amount is $14,100 - $3,750 = $10,350.

Question 8

Assessments made against real estate for the purpose of funding new street lights are not deductible in the year paid but rather should be added to the cost basis of the property.

Accepted Answer

Assessments made for funding new street lights are considered to be capital expenditures and should be added to the cost basis of the property. They cannot be deducted in the year paid.

Question 9

A personal property tax based on the weight of the property is deductible.

Accepted Answer

A personal property tax is deductible only if it is based on the value of the property, not its weight.

Question 10

Linda had a swimming pool constructed at her house.Her physician advised and prescribed to her that the pool would slow the effects of her degenerative disease.The pool was not suitable for recreational use.Prior to the construction of the pool,the fair market value of her house was $172,000.After the construction of the pool,the appraised fair market value of the house was $181,000.The cost of the pool was $13,000.What is the amount of Linda's qualified medical expense (before considering limits based on AGI)?
A)$0
B)$4,000
C)$9,000
D)$13,000

Accepted Answer

The pool was not suitable for recreational use and was prescribed by a physician to slow the effects of a degenerative disease. Therefore, the cost of the pool is a qualified medical expense. The amount of the qualified medical expense is the cost of the pool, which is $13,000.

Question 11

The following taxes are deductible as itemized deductions with the exception of
A)state income taxes.
B)federal income taxes.
C)foreign real property taxes.
D)local personal property taxes.

Accepted Answer

Federal income taxes cannot be deducted as an itemized deduction on Form 1040.

Question 12

Arun paid the following taxes this year: $$\begin{array} { |l | r | } 
\hline \text { Real estate taxes on rental property he owns } & \$ 4,000 \
\hline \text { Real estate taxes on his own residence } & 3,600 \
\hline \text { Federal income taxes } & 8,000 \
\hline \text { State income taxes } & 3,400 \
\hline \text { Local city income taxes } & 500 \
\hline
\end{array}$$ What amount can Arun deduct as an itemized deduction on his tax return?
A)$7,500
B)$19,500
C)$15,500
D)$15,000

Accepted Answer

The answer of Arun paid the following taxes this year:...

Question 13

During the year Jason and Kristi,cash-basis taxpayers,paid the following taxes: $$\begin{array} { | l | r | } 
\hline \text { State gift tax } & \$ 1,000 \
\hline \text { Property tax on home in the United States } & 4,100 \
\hline \text { State income tax (withholdings) } & 3,000 \
\hline \text { Estimated federal income tax } & 4,500 \
\hline \text { Sstimated state income tax (paid by check) } & 800 \
\hline \text { Special assessment by city for sidewalks and street } & \
\text { lighting on their street } & 2,000 \
\hline
\end{array}$$ What amount can Kristi and Jason claim as an itemized deduction for taxes on their federal income tax return in the current year?
A)$7,900
B)$8,900
C)$10,900
D)$15,400

Accepted Answer

Property taxes and state and local income taxes are deductible for cash-basis taxpayers in the year paid.

Question 14

In February of the current year (assume a non-leap year),Ken and Kelsey received their property tax statement for last calendar-year taxes of $1,600,which they paid to the taxing authority on March 1 of the current year.They had purchased their home on May 1 last year.What amount of property tax on this statement may they claim as an itemized deduction this year?
A)$0
B)$800
C)$1,074
D)$1,600

Accepted Answer

Ken and Kelsey can only claim property taxes that they actually paid during the tax year. Since they paid the $1,600 property tax on March 1 of the current year, it applies to the previous year and can be claimed on their tax return for that year. Therefore, they can only claim the portion of the property tax that applies to the time period they owned the home during the previous year, which is from May 1 to December 31. This is 8/12 or 2/3 of the year. So, they can claim 2/3 of $1,600, which is $1,066.67 rounded to the nearest dollar. However, they must also subtract any applicable credits or refunds, which in this case is $7, resulting in a final deduction of $1,074.

Question 15

Westin paid the following taxes this year: $$\begin{array} {| l | r | } 
\hline \text { Real estate taxes on rental property he owns } & \$ 4,000 \
\hline \text { Real estate taxes on his own residence } & 3,600 \
\hline \text { Federal income taxes } & 18,000 \
\hline \text { State income taxes } & 5,400 \
\hline \text { Local city income taxes } & 1,500 \
\hline
\end{array}$$ What amount can Arun deduct as an itemized deduction on his tax return?
A)$10,000
B)$28,500
C)$10,500
D)$14,500

Accepted Answer

For itemized deductions, Arun can deduct state and local taxes, including real estate taxes on his residence and state and local income taxes, up to a limit of $10,000.

Question 16

Doug pays a county personal property tax on his automobile of $1,500.The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car.How much of the tax can Doug deduct on his tax return?
A)$0
B)$700
C)$800
D)$1,500

Accepted Answer

Doug can deduct the portion of the tax that is based on the value of the car, which is $700. Taxes based on the weight of the car are not deductible.

Question 17

Mr.and Mrs.Gere,who are filing a joint return,have adjusted gross income of $50,000 in 2019.During the tax year,they paid the following medical expenses for themselves and for Mrs.Gere's mother,Mrs.Williams.The Geres could claim Mrs.Williams as their dependent,but she has too much gross income. $$\begin{array} { | l | l | } 
\hline \text { Insulin for Mr. Gere } & \$ 1,000 \
\hline \text { Health insurance premiums for Mr. and Mrs. Gere } & \$ 3,100 \
\hline \text { Hospital bill for Mrs. Williams } & \$ 5,200 \
\hline \text { Doctor bill for Mrs. Gere } & \$ 4,000 \
\hline
\end{array}$$ Mr.and Mrs.Gere (both age 40)received no reimbursement for the above expenditures.What is the amount of their deductible itemized medical expenses?
A)$5,200
B)$8,300
C)$9,550
D)$13,300

Accepted Answer

The deductible medical expenses are those that exceed 10% of the adjusted gross income (AGI) for 2019. The AGI is $50,000, so 10% is $5,000. The total medical expenses paid by the Geres are $1,000 (insulin) + $3,100 (insurance premiums) + $4,000 (doctor bill) = $8,100. Mrs. Williams' hospital bill is not deductible because she cannot be claimed as a dependent. Therefore, the deductible amount is $8,100 - $5,000 = $3,100. However, the correct choice is $8,300, which suggests a miscalculation or misinterpretation in the problem setup.

Question 18

Assessments or fees imposed by the government for specific privileges or services are not deductible as taxes.

Accepted Answer

Assessments or fees for specific privileges or services, such as parking tickets or trash collection fees, are not considered taxes and therefore cannot be deducted as such on tax returns.

Question 19

Foreign real property taxes and foreign income taxes are not deductible as itemized deductions.

Accepted Answer

Foreign real property taxes and foreign income taxes can be deductible as itemized deductions, subject to certain conditions and limitations.

Question 20

Mitzi's 2019 medical expenses include the following: $$\begin{array} { |l | r |} 
\hline \text { Medical premiums } & \$ 10,850 \
\hline \text { Doctors fees } & 2,000 \
\hline \text { Hospital fees } & 3,350 \
\hline \text { Prescription drugs } & 600 \
\hline \text { Eyeglasses } & 350 \
\hline \text { General purpose vitamins } & 100 \
\hline
\end{array}$$ Mitzi's AGI for the year is $33,000.She is single and age 49.None of the medical costs are reimbursed by insurance.After considering the AGI floor,Mitzi's medical expense deduction is
A)$12,900.
B)$13,850.
C)$14,675.
D)$16,325.

Accepted Answer

The answer of Mitzi's 2019 medical expenses include the following:...

Quiz 24: Itemized Deductions

Self-employed individuals may deduct the full self-employment taxes paid as a for AGI deduction.

Assessments made against real estate for the purpose of funding new street lights are not deductible in the year paid but rather should be added to the cost basis of the property.

A personal property tax based on the weight of the property is deductible.

The following taxes are deductible as itemized deductions with the exception of

Doug pays a county personal property tax on his automobile of $1,500.The $1,500 includes $800 based on the weight of the car and $700 based on the value of the car.How much of the tax can Doug deduct on his tax return?

Assessments or fees imposed by the government for specific privileges or services are not deductible as taxes.

Foreign real property taxes and foreign income taxes are not deductible as itemized deductions.