Lesson 4

Deductions and Tax Computations

OBJECTIVES

• Identify the correct standard deduction.

• Calculate and accurately report itemized deductions on Schedule A.

• Identify the miscellaneous deductions reported on Schedule A, lines 22 through 22 that are subject to the 2% AGI limitation. • Complete the Qualified Dividends and Capital Gain Tax Worksheet.

• Explain the process to calculate and report tax liability.

Intake/Interview Process

Form 13614 – Intake and Interview Sheet – Credits Section

Standard Deduction

• Based on the following factors: – Filing Status – Dependency Status – Blindness – Age

Taxable Income Computation

• Taxable income less than $100,000

Itemized Deductions

• Standard Deduction vs Itemized Deductions • When MFS taxpayer must itemize deductions

Medical Expenses

• Whose expenses • What expenses – Deductible – Nondeductible • Long-Term Care Premiums • New tax law – Medical standard mileage rate

Taxes

• State and Local Income Taxes • Real Estate Tax • Personal Property Tax

Interest

• Home Mortgage • Points • Investment

Contributions

• Recipient • Deductible • Nondeductible

Miscellaneous Deductions on Schedule A

• Expenses subject to the 2% Adjusted Gross Income (AGI) limitation vs. expenses not subject to the 2% AGI limitation

Total Itemized Deductions

• Work Exercise 6

Taxable Income Computation

• Taxable income less than $100,000 • Qualified Dividends and Capital Gain Tax Worksheet

Quality Review (QR)

Form 8158 – Quality Review Checklist Adjustments, Deductions, and Credits Section

Lesson Summary

• Standard Deduction or Itemized • Medical Expenses, Taxes, Interest, Contributions, Miscellaneous Deductions • Tax Charts • Qualified Dividends and Capital Gains worksheet

Travel Expenses

• Fully reimbursed • Accountable Plan • Adequate records • Form 2106

Deductible Expenses

• Away from home • Local travel • Meals • Reimbursable Expenses

Reservists

• Temporary Active Duty • More than 100 miles • Form 2106

Other Miscellaneous Deductions

• Worn off-duty?

• Uniform allowances • Insignia of rank, corps devices, epaulets, aiguillettes, and swords • Professional society dues

Educational Expenses

• Qualifications • Deductible Expenses • Education Credits

Business Travel Expenses

• Travel Expenses • Deductible Expenses – Car, Meal, Home Leave • How To Report • Form 2106 • Foreign Earned Income Exclusion

Military/International Summary

• Travel Expenses • Uniforms • Professional dues • Education • Home Leave