Lisa's moving expenses deduction for 2021 is:
Chapter6: Business Expenses
Section: Chapter Questions
Problem 61P
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Question
1. Brett and Lisa file taxes under the married filing jointly status. Lisa is a sales manager for an auto parts company and Brett takes care of their 3 children. In 2021, Lisa receives a promotion associated with a move to a new division located over 500 miles from their existing home. The cost to move their household items is $8,700. Lisa's employer reimburses her for $3,000 of those costs and also pays $2,100 for airfare for the entire family to fly to the new destination. Lisa's moving expenses deduction for 2021 is:
a.$0
b.$8,700
c.$5,700
d.$3,600
e.None of these choices are correct.
2.
Randy is advised by his physician to install an elevator in his residence, since he is afflicted with heart disease. The cost of installing the elevator is $10,000 and it has an estimated useful life of 10 years. He installs the elevator in January of the current year, and it increases the value of his residence by $8,000. Disregarding the limitation based on adjusted gross income, how much of the cost of the elevator may Randy take into account in determining his medical expense deduction for the current year?
a.$2,000
b.$1,000
c.$10,000
d.$0
e.None of these choices are correct.
3. During the current year, Seth, a self-employed individual, paid the following taxes:
What amount can Seth claim as an itemized deduction for taxes paid during the current year?
| Federal income tax | $15,000 |
| State income tax | $6,500 |
| Real estate taxes on land in South America (held as an investment) | $700 |
| State sales taxes | 300 |
| Personal property taxes based upon value | $1,600 |
| Federal self-employment tax | $ 800 |
What amount can Seth claim as an itemized deduction for taxes paid during the current year?
a.$9,100
b.$10,000
c.$9,900
d.$8,800
e.None of these choices are correct.
Expert Solution
Step 1
The question pertains to various tax deductions like the moving tax deduction, medical deduction and the taxes which can be claimed as deduction from the income before ascertaining the taxable income.
- Lisa incurs $8700 for moving the household to the new location which is 500 miles from her current location out of which $ 3000 is paid by the employer for the cost and $ 2100 for the airfare. However, it is important to note that post 2018 deduction for moving expenses is no more an allowable deduction.
- Permanent improvements made to the home are usually not allowed as a deduction However, whatever expense incurred is allowable if that was necessary for medical reasons. However, the deduction is allowed only if the expense incurred exceeds 10% of the gross adjusted income. Again the cost of improvement is reduced by the increase it makes to the value of the property.
- With respect to the various taxes paid by an individual the maximum deduction for the taxes is limited to $ 10,000 in any year. However, an itemized deduction of personal property tax, real estate tax and state and local taxes are deductible from the income. However in case of state taxes either the income tax or the local sale tax can only be claimed. 50% of the self employment tax can be claimed as an itemized deduction.
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ISBN:
9780357109731
Author:
Hoffman
Publisher:
CENGAGE LEARNING - CONSIGNMENT