Question

Describe in 200+ words the nature and the differences between "for" and "from" AGI deductions.

Describe and explain in 200+ words the specific types of deductions listed on the front of the 1040 Form and on the Schedule A.

Answer 1

Part 2:

• Unreimbursed Medical and Dental Expenses – For tax years 2017 and 2018 only, taxpayers who incur qualified out-of-pocket medical and/or dental expenses that are not covered by insurance can deduct expenses that exceed 7.5% of their adjusted gross incomes. Starting with tax year 2019 (payable in April 2020), medical deductions return to their current level of 10%.
• Interest Expenses – Homeowners can currently deduct the interest that they pay on their mortgages and home-equity debt.
• Taxes Paid – Taxpayers who itemize are able to deduct two types of taxes paid on their Schedule A: Personal property taxes, which include real estate taxes
• Charitable Donations – Any donation made to a qualified charity is deductible within certain limitations. Cash contributions that exceed 50% of the taxpayer's adjusted gross income must be carried over to the next year, as well as noncash contributions that exceed 30% of AGI. Starting in 2018 until 2025, that 50% figure becomes 60%.
• Casualty and Theft Losses – Any loss incurred as a result of a casualty or theft can be reported on the Schedule A
• Unreimbursed Job-Related Expenses and Certain Miscellaneous Deductions – W-2 employees who incur work-related expenses can deduct any aggregated expenditures that exceed 2% of their adjusted gross income.
• Other Miscellaneous Deductions – This final category of itemized deductions includes items such as gambling losses to the extent of gambling winnings, losses from partnerships or subchapter S-corporations, estate taxes on income in respect of a decedent and certain other expenses.
  
  

Part 1:

* "Deductions for AGI" can be claimed even if taxpayer does not itemize. It is important in determining the amount of certain itemized deductions. It includes

-Trade or business expenses
-Reimbursed employee business expenses
-Deductions from losses on sale or exchange of property
-Deductions from rental and royalty property
-Payment of Alimony
-One-half of self-employment tax paid
-Moving expenses

* "Deductions from AGI," on the other hand, must exceed the standard deduction to provide any tax benefit. Also called "below the line" or itemized deductions. It includes:

-Medical expenses (in excess of 7.5% of AGI)
-Certain state and local taxes
-Contributions to qualified charitable organizations
-Personal casualty losses (in excess of 10 % of AGI and a $100 floor per casualty)
-Certain personal interest expense (e.g., mortgage interest on a personal residence)
-Miscellaneous itemized deductions (in excess of 2% of AGI)

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