Deductible for taxpayer, spouse, and dependent (gross income and joint return tests do not apply for this purpose) Medical expenses is the only deduction allowed for payments made on behalf of someone other than the taxpayer * Uninsured expenses above 7.5% of AGI is deductible * Deductible items include dental, medical, and hospital care; prescription drugs; equipment such as wheelchairs, crutches, eyeglasses, hearing aids, contacts; transportation for medical care; medical insurance premiums (for insurance covering the costs of prescription drugs are deductible; for insurance against loss of earnings, limbs, sight, hearing and disability are not deductible); qualified long-term care expenses and insurance; alcohol and drug rehabilitation; weight-reduction programs if as part of medical treatment.* Non-deductable: funeral, burial, and cremation expenses; nonprescription drugs (except insulin); bottled water; toiletries; cosmetics; health spas; stop-smoking clinics; unnecessary cosmetic surgery.
TP received an additional 10 shares as a stock dividend. He sold the policy for $100 to B, an unrelated individual.
He has realized no income and his shares now have a basis of $8 each ($400 divided by 50 shares). Upon the death of TP’s spouse, B received $500 from the life insurance company.
* Qualifying automobile expenses: 0.19 (2008) per mile plus parking and tolls * Lodging: 50 per night, including person who is required to travel with.
No deduction is allowed for meals, unless part of treatment program.
* Deductible when paid and treatment received, unless prepayment is required Cash basis: in the year paid or withheld Federal taxes, death, excise, and sales taxes: generally non-deductible Taxpayers can elect to deduct state and local sales taxes instead of income taxes.
Amount of sales taxes can be determined by actual receipts or a table provided by the IRS.
Conversion of a Traditional IRA to a Roth IRA: can convert in years that their AGI is 0,000 or less, recognize gain at the time of the conversion to the extent that the conversion amount exceeds the tax basis in the IRA D.
Roth 401(k) Plans: Beginning in 2007, after-tax dollars are contributed, all distributions are tax-exempt E.
Accounting methods: unsophisticated taxpayers use accrual accounting A.
Accrual Method: unearned income: received service income: provided advance payments: can be deferred accrued expenses: claimed when liability becomes certain B.
Excess contributions are subject to a 6% excise tax each year until withdrawn – Deduction phased out proportionately over a ,000 range (,000 if married filing joint) based on AGI.