Itemized Deductions

Itemized Deductions

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When computing taxable income, personal expenses cannot be claimed as itemized deductions; however, tax rules do allow for some deductions that are essential for daily living. These specific expenses are deductible as itemized deductions. A standard deduction is a set amount that the taxpayer can claim based on his or her filing status. Itemized deductions are shown on the tax return using Schedule A, Itemized Deductions. The taxpayer must decide whether to itemize deductions or use the standard deduction and should choose whichever option is best for their tax situation. Itemized deductions are beneficial if the total amount is higher than the standard deduction.
 
This intermediate course includes how to determine if a taxpayer should itemized deductions or choose standard deduction. Tax rules allow for some deductions that are essential for personal living. Specific expenses are deductible as an itemized deduction. Itemized deductions are reported by using Schedule A, with filing Form 1040. Taxpayers should choose the best option for their tax situation, itemized, or standard deduction.
 
Itemized deductions are beneficial if the total amount is higher than the standard deduction. Some taxpayers must itemize deductions because they do not qualify for the standard deduction. Taxpayers not eligible to use the standard deduction include nonresident aliens and individuals who file a tax return for a period of less than 12 months. When a married couple files individual returns, if one spouse itemizes deductions, the other spouse must also itemize deductions. For additional information, refer to Publication 501, Exemptions, Standard Deduction, and Filing Information. The taxpayer must decide whether to itemize deductions or use the standard deduction and should choose whichever option is best for their tax situation.
 
Objectives
 
At the end of this course, the student will be able to do the following:
 
  • Explain which deductions are limited to the 7.5% floor.
  • Identify which deductions are limited to the 2% floor.
  • Recap what ordinary and necessary expenses are reported on Form 2106 for prior year tax returns.

 
Field of Study: Federal Tax Law 2 Hours
Course Level: Intermediate
Prerequisite: General tax preparation knowledge is required 
Delivery Method: Self-Study
  
IRS CE: 15G0B-T-00452-20-S
CTEC: 2080-CE-0167

Expiration Date to earn CEs: October 1, 2021