Question

. George is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2019.

Medical expenses (before 10%-of-AGI floor) $ 35,000

Interest on home mortgage 15,000

State income tax 7,500

State sales tax 4,500

Real estate tax 8,600

Charitable contribution 6,500

What is the amount of itemized deductions George may claim?

Answer 1

Explanation:

1. Eligible medical expenses for deduction is

Actual medical expense : $35,000

Less: 10% of AGI(2,65,000×10%) : ($26,500)

Eligible medical expense. : $8,500

2. Eligible amount of Interest on home

Mortagage : $15,000

3. Eligible amount

i) State income tax : $7,500

ii) state sales tax : $4,500

iii)Real estate tax : $8,600

Note 1 - we can claim deduction any one of state income tax or state sales tax but not both at a time.

Note 2 - i) or ii) + iii) = $10,000 ( i.e., any one of state income tax or state sales tax and real estate tax the deduction is restricted to $10,000 only )

Therefore eligible amount is $4500+ $8600 = $ 13,100 but restricted to deduction of $10,000 only. ( I have considered state sales tax and if you want you can also consider state income tax also but may not change because it anyway restricted to $10,000 )

4. Eligible amount of charitable contribution : $6,500

Conclusion:

Amount of itemized deductions george may claim is $40,000 ( $8,500+$15,000+$10,000+$6,500).