Question

Tracy is single and had adjusted gross income of ​$37,400 in 2018. Tracy also has the following​ items:

Unreimbursed medical expenses). ​$3,947

State income tax) 1,710

Interest expense​ (first mortgage) 3,212

Real estate tax). 690

Interest expense—car loan). 471

Interest expense—credit card). 979

Gifts to charity). 206

The amount Tracy may claim in itemized deductions is: ?????????

Answer 1

Step-1

Calculate the itemized deduction:

The itemized deduction is the amount spend on certain expense considered as the tax exmpted income. The standard deduction is the fixed amount decided by tax authority can deducted from taxable income. The itemized deduction can be calculated as follows:

Values for substitution:

Adjusted gross income (AGI) = $37400

Medical expenses = $3947

State income tax = $1710

Interest expense​ (first mortgage) = $3212

Real estate tax $ 690

Interest expense—car loan $471

Interest expense—credit card $ 979

Gifts to charity $ 206

Step-2

Analysis:

The medical expenses are allowed to itemized deduction only excess amount of 10% of AGI.

The medical expenses allowed to itemized deduction obtains by deducting percentage of AGI from the medical expenses.

= Medical expense - (10% of AGI)

= $3947 -(10% of 37400)

= $3947 - 3740

=$207

Step-3

The itemized deduction calculates as

Itemized deduction = Allowed medical expenses + state income tax + Interest Expenses (First mortagage) + Gift to charity + Real etate tax

= By susbstituting the values, we get

The itemized deduction = 207 + 1710 + 3212 + 206 + 690

= $6025

(NOTE: Interest expenses on both car loan and credit card are not allowed in deductions )

The amount Tracy may claim in itemized deductions is $6025