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.
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
Expiration Date to earn CEs: October 1, 2022.
IRS CE: 15G0B-T-00452-20-S