Problem 10-43 (LO. 2, 3, 4, 5, 6, 7, 8) Linda, who files as a single taxpayer, h

Question

Problem 10-43 (LO. 2, 3, 4, 5, 6, 7, 8) Linda, who files as a single taxpayer, had AGI of $280,000 for 2017. She incurred the following expenses and losses during the year: Medical expenses (before the 10%-of-AGI limitation) State and local income taxes State sales tax Real estate taxes Home mortgage interest Automobile loan interest Credit card interest Charitable contributions Casualty loss (before 10% limitation but after $100 floor) Unreimbursed employee expenses subject to the 2%-of-AGI limitationn $33,000 4,500 1,300 4,000 5,000 750 1,000 7,000 34,000 7,600 Linda's total itemized deductions before any phaseout are $ 33,500V Linda's total itemized deduction is 33,750 X Feedback Check My Work As a general rule, the deduction of personal expenditures is disallowed by § 262 of the Code. However, Congress has chosen to allow certain personal expenditures to be deducted as itemized deductions. Personal expenditures that are deductible as itemized deductions include medical expenses, certain taxes, mortgage interest, investment interest, and charitable contributions

Explanation / Answer

linda itemized deduction after phaseout / Application of total limit :-

In this case also Linda will deduct state and local income tax as this exceeds the sales tax paid.

Particulars Amount($) Amount($) State and Local Income Tax 4500 Real Estate Taxes 4000 Home Mortgage Interest 5000 Charitable contribution 7000 Unreimbused Employee Expenses (7600-(280000*2%) 2000 Total 22500 Now Reduction is Equal to Lesser of the two 3% * ($280000 - $261500) 555 or ($22500*80%) 18000 Amount of Reduction (555) Itemize deduction subject to overall limitation/phaseout 21945 Items not subject to overall limitation / Phaseout Medical Expenses ($33000-($280000*10%)) 5000 Casualty Loss ($34000-($280000*10%)) 6000 Total Itemized Deduction $32945

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