During the current year, Seth, a self-employed individual, paid the following taxes: $$\begin{array} { l r }
\text { Federal income tax } & \$ 15,000 \
\text { State income tax } & \$ 8,500 \
\text { Real estate taxes on land in South America (held as an investment) } & \$ 1,000 \
\text { State sales taxes } & 300 \
\text { Personal property taxes based upon value } & \$ 1,600 \
\text { Federal self-employment tax } & \$ 800
\end{array}$$ What amount can Seth claim as an itemized deduction for taxes paid during the current year?

Question

During the current year, Seth, a self-employed individual, paid the following taxes: $$\begin{array} { l r } 
\text { Federal income tax } & \$ 15,000 \
\text { State income tax } & \$ 8,500 \
\text { Real estate taxes on land in South America (held as an investment) } & \$ 1,000 \
\text { State sales taxes } & 300 \
\text { Personal property taxes based upon value } & \$ 1,600 \
\text { Federal self-employment tax } & \$ 800
\end{array}$$ What amount can Seth claim as an itemized deduction for taxes paid during the current year?

Quizplus · Accepted Answer

Seth can claim a total of $27,200 in taxes paid during the current year ($15,000 + $8,500 + $1,000 + $300 + $1,600 + $800). However, due to the $10,000 limit on the deduction for state and local taxes, the maximum amount he can claim as an itemized deduction is $10,000 (which includes the state income tax, the South American real estate taxes, and the state sales tax). He can also claim the full amount of the personal property taxes and the self-employment tax as itemized deductions, which brings the total to $10,000 + $1,600 + $800 = $12,400. However, the question specifically asks for the amount of taxes he can claim as an itemized deduction, which is $10,000. Therefore, the correct answer is (D) $10,000.

During the Current Year, Seth, a Self-Employed Individual, Paid the Following