Bill would like some tax benefits for his investment expenses incurred this year. His AGIis $190,000. Currently, his expenses consist of: (1) $1,000 investment advice fees, (2)$1,500 unreimbursed employee business expenses (a miscellaneous itemized deduction), and (3) $600 tax return preparation fees. How much more, if any, must Bill spend forinvestment expenses this year before he receives any tax benefit?

Question

Quizplus · Accepted Answer

Bill's AGI is $190,000, which means he is subject to a limit on the maximum amount of miscellaneous itemized deductions he can claim. This limit is 2% of his AGI, which in this case is $3,800.

Currently, Bill's total miscellaneous itemized deductions are $2,100 ($1,500 + $600), which is less than the $3,800 limit. However, in order for Bill to receive any tax benefit from his investment expenses, his total investment expenses must exceed the 2% limit of $3,800.

Therefore, Bill must spend more than $700 ($3,800 - $2,100) on investment expenses before he receives any tax benefits.

Bill Would Like Some Tax Benefits for His Investment Expenses