Question

For calendar year 2021, Stuart and Pamela Gibson file a joint return reflecting AGI of $326,500. Their itemized deductions are as follows: Note: All expenses are before any applicable limitations, unless otherwise noted.

Casualty loss in a Federally declared disaster area (not covered by
insurance; before the 10%-of-AGI limitation but after the $100 floor) $79,600
Home mortgage interest (loan qualifies as acquisition indebtedness) 31,840
Credit card interest 1,592
Property taxes on home 23,880
Charitable contributions 43,780
State income tax 27,860
Tax return preparation fees 2,388
Round your final answers to the nearest whole dollar.
Calculate the amount of itemized deductions the Gibsons may claim for the year.
____________

Answer 1

The Gibsons' total allowable itemized deductions for the year are $173,410, after applying relevant limitations and excluding non-deductible items such as credit card interest and tax preparation fees.

Step-by-step explanation:

To calculate the amount of itemized deductions the Gibsons may claim for the year, we must consider which expenses are allowable deductions according to the tax code. Here is a breakdown of their listed expenses:

• Casualty loss in a Federally declared disaster area (subject to the 10%-of-AGI limitation): $79,600 - ($326,500 * 10%) = $46,950
• Home mortgage interest: $31,840 (qualifies as acquisition indebtedness)
• Credit card interest: $1,592 (this is generally not deductible)
• Property taxes on home: $23,880
• Charitable contributions: $43,780
• State income tax: $27,860
• Tax return preparation fees: $2,388 (miscellaneous deductions are no longer deductible for tax years 2018 through 2025)

Therefore, the total allowable itemized deductions for Stuart and Pamela Gibson would be:
$46,950 (casualty loss) + $31,840 (home mortgage interest) + $23,880 (property taxes) + $43,780 (charitable contributions) + $27,860 (state income tax) = $173,410.

Note that from 2018-2025, miscellaneous deductions such as tax preparation fees are not deductible, and personal casualty losses are deductible only if they occur in a federally declared disaster area. Credit card interest is also generally not deductible.

Answer 2

The Gibsons can claim a total of $174,210 in itemized deductions for the year 2021, after considering the deductibility of home mortgage interest, property taxes, charitable contributions, state income tax, and their casualty loss in a Federally declared disaster area.

Step-by-step explanation:

To calculate the itemized deductions the Gibsons can claim for 2021, we will follow the Internal Revenue Service (IRS) rules for what can be deducted on a Schedule A. Note that credit card interest is not deductible, and tax return preparation fees are not deductible in 2021. Here is the calculation:

• Home mortgage interest: $31,840

• Property taxes on home: $23,880

• Charitable contributions: $43,780

• State income tax: $27,860

For the casualty loss, which occurred in a Federally declared disaster area, the amount deductible is the loss amount less 10% of AGI and a $100 floor:

• Casualty loss: $79,600 - (10% of $326,500) - $100 = $79,600 - $32,650 - $100 = $46,850

Adding up the deductible amounts gives us:

• $31,840 (home mortgage interest) + $23,880 (property taxes) + $43,780 (charitable contributions) + $27,860 (state income tax) + $46,850 (casualty loss) = $174,210

Therefore, the total itemized deductions the Gibsons can claim for the year 2021 is $174,210.