Question

1. What are the general requirements for a medical expense to be considered deductible?
2. For state or local property taxes to be deductible as an itemized deduction, what three tests are required?
3. What happens to a charitable contribution that is in excess of the AGI limits?

Answer 1

1) Medical expenses will become deductible only when you are employee or filing your returns for claiming deductions from total income for your tax savings purposes.

a) medical expenses must be always to be paid by cheque or ECS or electronic mode approved by your employer for re-imbursement purposes or for tax deductible purposes in the excess of certain cash limits.

b) medical insurance premium for self, spouse or parents or family members who are wholly dependent on individual or medical expenses on dis-abled persons can be allowed as deduction always at the time of filing expenses.

c) It can also be claimed as deduction from employers profit as it is being incurred for employee purporses as it is one of the business expenses.

2) In-order to claim deduction for property taxes from NAV (Net Asset Value), main Tests are:

a) It has to be paid by the landlord, who receives the rental income.

b) It has to be paid for the current year or of past year, means any property taxes due for current year or previous year cannot be claimed as deduction which is not-paid.

c) Property taxes are always must be paid by cheque/ECS/other electronic mode, because there is a risk of partial payment when we make cash payments.

d) We should also ascertain the percentage of property tax is being charged on the municipal value of the property so that any rate changes from year to year can be known or if balance in payment of such taxes then can be paid.

3) When a charitable institution has income in excess of AGI limitation, As charitable incomes are subject to overall limitation which is based on tax-payers AGTI (Adjusted gross total income), then such charitable institution can carry forward such excess amount to a certain number of years, generally for 5 years.

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