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42 Cards in this Set

  • Front
  • Back
The cost for most legal medical and dental procedures is deductible, but there is an exception. What is it?
Cosmetic surgery unless it is necessary to correct or improve a deformity arising from a congenital abnormality, accident, or disfiguring disease
What kinds of medicines and drugs may be claimed as itemized deductions?
Prescription medicines and drugs and insulin
Although the cost of non-prescription medicines is not deductible, there is a tax break available. What is it?
If the medicine is used to treat a specific disease or diagnosed condition, the taxpayer may be reimbursed for the expenses from the funds in their Section 125 plan
Is the cost of a weight loss program or weight loss surgery deductible?
If it has been prescribed or recommended by a doctor to treat a specific disease or condition. (Obesity, diabetes, high blood pressure, etc…) Food is not deductible
If a taxpayer drives his own car to the doctor or to the pharmacy to buy his prescription medications, what expense, in addition to the doctor bill or cost of the medicine, is deductible?
He may take the actual cost of gas and oil or he may deduct 24 cents per mile. Regardless of whether he chooses actual expenses or mileage, he may deduct the cost of parking fees and tolls related to medical care
A man paid $2,500 to have a hot tub installed in his home because his doctor prescribed it for the man’s back problems. The hot tub increased the value of his home by $2,000 and cost $300 to run during the year. How much may be deducted as a medical expense?
The $500 over and above the increase in value to the home plus the $300 operating expenses for a total of $800
Pete Carter is confined to a wheelchair. He paid $8000 to have the counters in his kitchen and bathroom lowered so he could use them. What is the tax consequence of Pete’s remodeling?
The full $8000 is deductible because the work was done to make it more habitable for a handicapped individual
Is the deduction for medical expenses limited?
Yes, only the excess over 7 ½ percent of the taxpayer’s AGI can be deducted
What types of taxes are deductible?
State and local income taxes or general sales taxes (but not both), real estate taxes, personal property taxes, and foreign income taxes that were paid or withheld during the year
Is federal income tax withheld deductible?
No
Are social security and Medicare taxes withheld deductible?
No
Where are state and local income taxes withheld deducted?
On Schedule A, line 5
A taxpayer makes his final 2008 state estimated tax payment on January 15th 2009. Where should he report this item?
On his 2009 Schedule A, line 5.
A taxpayer has a state balance due, which she paid when she filed her return on April 8th, 2009. Where should she report this item?
Schedule A, line 5.
A taxpayer has a 2008 local income tax balance due, which she paid in full on April 8th 2009. Where should she report this item?
Schedule A, line 5
A taxpayer has 2009 state estimated tax payments, which he made on the 15th of April, June and September, and on January 15th, 2010. Where should she report these items?
The April, June and September payments are included on the 2009 Schedule A, line 5. The January payment is not included because it was made in 2010. The total of the four payments is entered on the estimated payments line of the 2009 state return.
For the tax on a motor vehicle to qualify, the qualified tax is the lower of tax paid or the tax on what set purchase price?
$49,500
A taxpayer may purchase how many motor vehicles before the deduction is no longer available?
There’s no limit on the number of vehicles. The limits are placed on the purchase price of $49,500 and the MAGI
After what date must a new car be purchased to qualify for the motor vehicle tax?
February 16, 2009 (ending on 12/31/09)
For income tax purposes, we divide interest into several categories. What are they?
Business interest, investment interest, personal interest, qualified home mortgage interest and passive activity interest. (Business and passive activity interest are discussed later)
Why is it important to distinguish qualified home mortgage interest from personal interest?
Qualified home mortgage interest is deductible while personal interest is not
On how many personal homes may a taxpayer deduct home mortgage interest?
Two. They can deduct property taxes on as many homes as they own.
What are the two categories of home mortgage interest?
Acquisition debt and home equity debt
What is acquisition debt?
Debt secured by the home, incurred to buy, build or improve the home
What is home equity debt?
Debt secured by the home and used for a purpose other than to buy, build or improve the home
Generally, what is the limit on acquisition debt for which interest paid may be deducted in full?
One million dollars
What is the comparable limit for home equity debt?
$100,000 or the difference between the FMV of the home and the total remaining acquisition debt.
What are points?
One-time interest charge paid up front for the use of money. Points are also called loan origination fees, maximum loan charges, and loan discounts
When are points deductible?
Points paid to obtain a first mortgage are deductible in the year paid. Points paid on a refinance are amortized over the life of the loan
What happens when points are paid by the seller?
The buyer deducts them and reduces the basis of the home by the amount of seller paid points.
What is investment interest?
Interest on loans used to purchase investment property
To what extent is investment interest deductible?
To the extent of net investment income
Is interest paid to purchase nontaxable investments such as municipal bonds, deductible?
No
What is personal interest?
Interest on credit cards, car loans, and other loans used for personal purposes. Home mortgage interest in excess of the limits discussed is also considered personal interest
Is personal interest deductible?
Generally, no, except for qualified student loan interest as discussed in Chapter 11
Who qualifies for the special Oregon medical deduction?
Taxpayers (either spouse) age 62 who itemizes on their Oregon return
What is the amount of the deduction?
The smaller of Line 1 or Line 3 from the federal Schedule A
How much is the credit for long-term care insurance premiums credit?
15% with a maximum of $500
If using the LTC credit, what adjustments to the Oregon return must be made for the difference in itemized deductions?
An addition to Oregon income based on Total Long-term Care Premiums on Schedule A/Total medical itemized deductions on Schedule A
(Line 1)*Federal medical
Deductions allowed
(Line 4)=Oregon addition
What is the only tax paid deducted on the federal return not allowed on the Oregon return?
Tax paid to Oregon
If the taxpayer claimed a credit for taxes paid to another state, can he also deduct those same taxes as an itemized deduction on the Oregon return
no
How is the mortgage interest credit adjusted on the Oregon return?
Subtraction for the amount of mortgage interest credit allowed on the federal return up to $2,000