Question

In: Accounting

Omar paid the following taxes this year (2020): Real estate taxes on rental property he owns...

Omar paid the following taxes this year (2020):

Real estate taxes on rental property he owns

$5,000

Real estate taxes on his own residence

7,600

Federal income taxes

12,000

State income taxes

4,400

Local city income taxes

400

What amount can Omar deduct as an itemized deduction on his tax return?

A) $7,600                              

B) $10,000

C) $12,400

D) $29,400

LABEL AND SHOW ALL WORK.

Solutions

Expert Solution

The correct answer for the question is Option B - $10,000. Taxpayers who elect to itemize the deductions on their tax return can deduct a total of $10,000 for all the the local and state taxes paid. Hence, even though the combined total of State income taxes, Real estate taxes and Local city income taxes is greater than $10,000 , Omar's deduction will be limited to the ceiling of $10,000. Omar will hence be able to deduct $10,000 in order to arrive at his taxable income. Hence , this is the correct answer.

Option A is incorrect as state and local city income taxes are also eligbilbe for deduction but upto the maximum ceiling by Omar.

Option C is incorrect per the above calculations and considerations.

Option D is incorrect as this option includes all the amounts mentioned in the question which is incorrect per the above explanation.

Please let me know if you have any questions via comments and all the best :)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Suppose a property has estimated real estate taxes for the current year of $4,398.25 dollars and that taxes are paid at the end of the year.
Suppose a property has estimated real estate taxes for the current year of $4,398.25 dollars and that taxes are paid at the end of the year. If the property is   being sold on May 25 in a year with 365 days and the buyer and seller agree to prorate the taxes at the time of closing with the buyer being responsible for theday of closing, what amount will be charged to the seller on the settlement statement?$1,000.00$1,735.20$2,663.05  None of the above
Hassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen...
Hassad owns a rental house on Lake Tahoe. He uses a real estate firm to screen prospective renters, but he makes the final decision on all rentals. He also is responsi- ble for setting the weekly rental price of the house. During the current year, the house rents for $1,500 per week. Hassad pays a commission of $150 and a cleaning fee of $75 for each week the property is rented. During the current year, he incurs the follow- ing...
Tabitha sells real estate on March 2 of the current year for $350,800. The buyer, Ramona, pays the real estate taxes of $17,540 for the calendar year, which is the real estate property tax year.
Tabitha sells real estate on March 2 of the current year for $350,800. The buyer, Ramona, pays the real estate taxes of $17,540 for the calendar year, which is the real estate property tax year.Round any division to four decimal places and use in subsequent calculations. Round your final answers to the nearest dollar. Assume a 365-day year.a. Determine the real estate taxes apportioned to and deductible by the seller, Tabitha, and the amount of taxes deductible by Ramona.Tabitha: $Ramona:...
Tabitha sells real estate on March 2 for $260,000. The buyer, Ramona, pays the real estate taxes of $5,200 for the calendar year, which is the real estate property tax year. Assume that this is not a leap year.
Tabitha sells real estate on March 2 for $260,000. The buyer, Ramona, pays the real estate taxes of $5,200 for the calendar year, which is the real estate property tax year. Assume that this is not a leap year. a. Determine the real estate taxes apportioned to and deductible by the seller, Tabitha, and the amount of taxes deductible by Ramona. b. Calculate Ramona’s basis in the property and the amount realized by Tabitha from the sale.    
Tom sells real estate on March 2 for $260,000. The buyer, Raul, pays the real estate taxes of $5,200 for the calendar year, which is the real estate property tax year. Assume that this is not a leap year.
Tom sells real estate on March 2 for $260,000. The buyer, Raul, pays the real estate taxes of $5,200 for the calendar year, which is the real estate property tax year. Assume that this is not a leap year.A. Determine the real estate taxes apportioned to and deductible by the seller, Tom, and the amount of taxes deductible by Raul.B. Calculate Raul's basis in the property and the amount realized by Tom from the sale.
Hugh, a self-employed individual, paid the following amounts during the year 2020: Real estate tax on...
Hugh, a self-employed individual, paid the following amounts during the year 2020: Real estate tax on Texas residence   $2,000 State income tax withheld   1,500 Additional state income tax paid when filing his 2019 tax return 600 Real estate tax on a rental property   2,000 State sales taxes 900 State motor vehicle tax (based on the value of personal use automobile) 400 Sidewalk special assessment   2,000 Federal income tax   5,000 Self-employment tax   1,000 Gambling loss (gambling winning is $100)   1,000 What...
Hugh, a self-employed individual, paid the following amounts during the year 2020: Real estate tax on...
Hugh, a self-employed individual, paid the following amounts during the year 2020: Real estate tax on Louisiana residence   $2,000 State income tax withheld   1,500 Additional state income tax paid when filing his 2019 tax return 600 Real estate tax on a rental property   2,000 State sales taxes 900 State motor vehicle tax (based on the value of personal use automobile) 400 Sidewalk special assessment   2,000 Federal income tax   5,000 Self-employment tax   1,000 Gambling loss (gambling winning is $100)   1,000 What...
Sally owns real property for which the annual property taxes are$16,680. She sells the property...
Sally owns real property for which the annual property taxes are $16,680. She sells the property to Kate on April 2, 2020, for $834,000. Kate pays the real property taxes for the entire year on October 1, 2020. Assume a 365-day year. Round any division to four decimal places. Round your final answers to the nearest dollar. a. How much of the property taxes can be deducted by Sally and how much by Kate? Sally can deduct $____ and Kate...
Residential real estate was purchased in 2014 for $375,000, held as rental property, and depreciated straight-line....
Residential real estate was purchased in 2014 for $375,000, held as rental property, and depreciated straight-line. Assume the land cost was $75,000 and the building cost was $300,000. Depreciation totaled $34,089. The building and land were sold on June 10, 2017, for $690,000 total. What is the tax status of the property, the nature of the gain from the disposition, and is any of it § 1250 depreciation recapture gain or unrecaptured § 1250 gain?
1. During the current year, Mr. and Mrs. West paid the following taxes: Property taxes on...
1. During the current year, Mr. and Mrs. West paid the following taxes: Property taxes on residence $1,900 Special assessment for installation of a sewer system in their neighborhood $1,000 State personal property tax on their automobile (based on value) $400 Property taxes on land held for long-term appreciation $600 What amount can the Wests deduct as property taxes in calculating itemized deductions for the current year? a. $2,900 b. $2,300 c. $1,900 d. $0 e. None of these choices...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT