Sylvester files as a single taxpayer during 2017 and claims one personal exempti
ID: 2529840 • Letter: S
Question
Sylvester files as a single taxpayer during 2017 and claims one personal exemption. He itemizes deductions for regular tax purposes. He paid charitable contributions of $15,700, real estate taxes of $900, state income taxes of $8,700, and interest on a home-equity loan of $2,700. Sylvester’s regular taxable income is $142,000.
a. What is Sylvester's AMTI if he used the home-equity proceeds to purchase a car?
b. What is Sylvester's AMTI if he used the home-equity loan proceeds to build a new garage next to his home?
Explanation / Answer
a)
Regular Taxable Income $142,000
Personal exemption applicable $4,050
Real Estate Taxes $900 (No Exemption)
State income tax $8,700 (No Exemption)
Interest on home equity loan $2,700 (No Exemption)
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AMTI $158,350
Charitable contributions are allowed for deduction.
For regular tax purposes, Interest paid on homeloan is allowed for deduction however the proceeds are used. But for AMT purposes it is deductible only if loan proceeds are used for acquiring /substantially improving the home.
b)
Regular Taxable Income $142,000
Personal exemption applicable $4,050
Real Estate Taxes $900
State Income tax $8,700
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AMTI $155,650
Deduction for charitable contributions is applicable.
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