During the current year, Austin, a self-employed individual, paid the following

Question

During the current year, Austin, a self-employed individual, paid the following amounts:

Federal income tax - $5,000

State income tax - $3,000

Real estate taxes on land (held as an investment) - $800

State sales taxes - $600

State occupational license fee - $400

What amount can Austin deduct as taxes by itemizing his deductions?

Colby has decided to make charitable contributions of property this year. He donates a picture that he had created to a local art museum (adjusted basis $900, fair market value $40,000). His adjusted gross income is $90,000. What is his charitable deduction for this year?

Explanation / Answer

1. There are 4 types of deductible non business taxes:

State, local and foreign income taxes

State and general local sales tax

State, local and foreign real estate taxes

State and local personal property taxes

According to the above list of deductible expenses, Austin can deduct $4800 in the following manner:

$3000 + $800 + $600 + $400 = $4800

2. Colby's charitable deduction for the year is $0

AsPublication No. 526 provides that any charitable deduction can be available only if it is made to a qualified organization

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