Question

Choose the response that describes the itemized deductions that hae an annual limit of no more than 50% of adjusted gross income. Assume the taxpayer does not live in a federally declared disaster area. A. Gifts to charity, B. Deductible casualty losses, C. Investment interest expenses, D. Medical expensess

Answer 1

Itemized Deductions are eligible expenses that individual taxpayers can claim on Federal Income Tax returns and also it decrease their taxable income.

A. Gifts to charity: The Charitable Contribution deduction / Gifts of Charity is limited to 50% of Adjusted Gross Income (AGI), but in some cases 20% and 30% limits may apply.

B. Deductible Caualty Losses: We can only deduct losses not reimbursable by insurance companies. We’ll need to subtract $100 from each casualty loss of personal property. The total of casualty losses on personal property must be more than 10% of your adjusted gross income (AGI). Otherwise, the deductions cannot be claimed for that portion of the loss above the limit.

C. Investment Interest Expenses: Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions.

D. Medical Expenses: These expenses are generally subject to a 10% limit, which means you can deduct the portion of your expenses that exceeds 10% of your AGI. These Qulaified Medical EExpenses include payments for the diagnosis, prevention, treatment, or cure of disease – as well as payments for treatments that affect any structure or function of the body.

As per the above information, we can justify that the Itemized Deduction that has an annual limit of no more than 50% of AGI is A. Gift of Charity