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Joe Taxpayer has AGI of $100,000 in 2018 for the following He has doctor costs of $10,000, hear...

  1. Joe Taxpayer has AGI of $100,000 in 2018 for the following

    1. He has doctor costs of $10,000, hearing aid of $1,000, bayer aspirin of $500, braces of $3,000, and eyeglasses of $1000. What is is deductible medical?

  1. He has state withholding of $10,000, property taxes of $5,000, DMV of $500. What is his deductible state taxes?

  1. He purchased a home in 2018, and paid mortgage interest of $30,000. The loan on the home is $1,000,000. He also has credit card debt interest of $1000. What is his deductible interest?

  1. He has employee business expenses of $3,000, and tax preparation fees of $500. His deductible miscellaneous expenses would be?

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Answer #1

Tax payer: Mr. Joe

AGI= $ 1000,000

  1. Deductible Medical expenses:

Medical expenses can be deducted if the portion of t medical expenses exceeds 7.5 % of Adjusted Gross Income (AGI).

Mr.Joe’s AGI = $100,000

                                = $100,000*7.5%= $7,500

Actual medical expenses of Mr.Joe= $10,000

As the medical expenses exceeds the limit of 7.5% of AGI ($10,000 > $7500) he can claim deduction.

Therefore $10000 spent by Mr.Joe as medical expenses is deductible.

  1. 1) State withholding of $ 10,000 is deductible

2) Property tax = $5000.

The total amount of state and local taxes, including property taxes, that you can deduct is limited to $10,000 per year. As the property tax paid by Mr.Joe is less than $ 10,000, it is deductible.

3) DMV of $500 is deductible.

C)            1) the mortgage interest of $30,000 is deductible.

2) The Tax Cuts and Jobs Act (TCJA), which is in effect from 2018 to 2025, allows homeowners to to deduct interest on home loans up to $750,000.

Home Loan of Mr. Joe is $1,000,000. He is allowed to deduct only upto $ 750,000 and the remaining is taxable.

3) credit card debt interest of $1000 is not allowed as deduction. Hence it is taxable.

D)          deductible miscellaneous expenses is subject to 2 % of AGI.

                Mr.Joe’s AGI = $100,000

                                = $100,000*2%= $2,000

1) Employee business expenses is deductible only by the government officials- Armed Forces reservist, qualified performing artist, fee-basis state or local government official, and employee with impairment-related work expenses.

Hence it is taxable.

2) Tax preparation fee of $ 500 is not a deductible miscellaneous expense.

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