Question

31. Paul, a calendar year single taspayer, has th ollwing information for 2018: AGI $175,000 State income taxes 13,500 State sales tax 3,000 Real estate taxes 18,900 Gambling losses (gambling gains were S12,000) Paul's allowable itemized deductions for 2018 are: a. $10,000 b. $16,800. c. $39,200 d. $42,200. e. None of the above

Answer 1

c. $39,200

Itemized deduction = state income taxes + Real state taxes + Gambling losses = 13500 + 18900+ 6800 = $39,200

Notes:

• The taxpayer elects itemized deduction if the actual deductions are more than standard deduction. In this case, it is more.
• The taxpayer either elects to deduct state income taxes or state sales taxes. In this case, deducting state income taxes is beneficial as it is higher. (Topic 503 of IRS)
• Real estate taxes are deductible taxes under topic 503 of IRS
• Gambling losses can be deducted if it is itemized. It cannot be more than amount of gambling reported on 1040 return.