In 2001, Elsie purchased a house for $85,000 to use as her personal residence. She paid $17,000 and borrowed $68,000 from the local savings and loan company. In 2005 she paid $10,000 to add a room to the house. In 2007 she paid $700 to have the house painted and$1,400 for built-in bookshelves.
Deductions for AGI reduce the taxpayer's gross income by the full amount of the deduction even if the standard deduction is used. Deductions from AGI are not beneficial unless their sum exceeds 25% of the AGI, in which case these deductions will be included as itemized deductions. C.
State and local sales taxes if the taxpayer makes an election to deduct their state and local sales taxes instead of deducting their state and local income taxes. They make this election annually. State, local, and foreign income, war profits, and excess profits tax. State, local, and foreign real property taxes.
If the care is prepaid, the amount is deductible when there is a legal obligation to pay. D. A deduction can be taken in the year that the services are performed.
Capital losses are deductible only for investments that have been determined to meet the "reasonably safe" standard. High-risk, start-up companies do not meet this standard. D. If the individual taxpayer does not have capital gains, only $4,000 of capital losses may be deducted annually.
For example, deductions incurred in a business are generally for AGI whereas investment expenses generally are from AGI deductions subject to various limitations. Losses incurred on business property are ordinary, whereas losses on investment property generally are capital losses and are subject to limitation.
Investment expenses are not subject to a floor. C. Different tax consequences may result depending on the type of activity. For example, deductions incurred in a business are generally for AGI whereas investment expenses generally are from AGI deductions subject to various limitations.