Answer:
To determine Tyler's total itemized deductions allowed for 2020, we need to understand the rules and regulations set by the Internal Revenue Service (IRS) in the United States. The IRS allows taxpayers to deduct certain types of expenses from their taxable income, which can lower their overall tax liability. These deductions are typically categorized as either standard deductions or itemized deductions.
Standard deductions are a fixed amount that taxpayers can subtract from their income, while itemized deductions allow taxpayers to list eligible expenses and deduct their actual amounts. In 2020, the standard deduction was $12,400 for single filers and $24,800 for married couples filing jointly.
However, Tyler has several expenses that could potentially qualify as itemized deductions. Let's examine each one:
1. Rental Loss: The IRS allows landlords to deduct rental losses from their taxable income. However, these losses are usually subject to the "passive activity loss" rules. These rules limit the amount of rental losses that can be deducted in a given year. In general, if you actively participate in a rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. However, this special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. But since Tyler had a rental loss of $4,500, he can deduct this full amount.
2. Mortgage Interest: The IRS allows homeowners to deduct mortgage interest paid on their primary residence. In 2020, this deduction was limited to interest paid on $750,000 of home acquisition debt for taxpayers filing singly or jointly. Since Tyler paid $3,500 in mortgage interest on his primary residence in 2020, he can deduct this full amount.
3. Real Estate Taxes: The IRS allows homeowners to deduct real estate taxes paid on their primary residence. However, this deduction is subject to a total limit of $10,000 ($5,000 for married filing separately) for all state and local taxes paid - including property taxes and either income or sales taxes. Since Tyler paid $3,000 in real estate taxes on his primary residence in 2020, he can deduct this full amount.
4. Moving Expenses: Prior to 2018 tax reform known as the Tax Cuts and Jobs Act (TCJA), individuals could deduct moving expenses if the move was closely related to starting a new job or job location and they met certain distance and time tests. However, for tax years 2018 through 2025, the deduction for moving expenses is suspended for everyone except qualifying members of the Armed Forces.
So based on these rules and regulations set by the IRS:
- Tyler can deduct his rental loss of $4,500.
- He can also deduct his mortgage interest of $3,500.
- He can also deduct his real estate taxes of $3,000.
- However, he cannot deduct his moving expenses because they are not deductible under current tax law unless he is a qualifying member of the Armed Forces.
Adding these up gives us a total itemized deduction amount of $11,000 ($4,500 + $3,500 + $3,000).
Therefore,
e. $11,000
is Tyler's total itemized deductions allowed for 2020.
The probability that this answer is correct is high given that it follows IRS guidelines for itemized deductions in 2020.