Question

Clem is married and is a skilled carpenter. Clem's wife, Wanda, works part time as a substitute grade school teacher. Determine the amount of Clem's expenses that are deductible for AGI this year (if any) under the following independent circumstances:

a. Clem is self-employed and this year he incurred $1,005 for tools and supplies related to his job. Since neither were covered by a qualified health plan, Wanda paid health insurance premiums of $4,570 to provide coverage for herself and Clem (not through an exchange).
b. Clem and Wanda own a garage downtown that they rent to a local business for storage. This year they incurred $1,750 in utilities and depreciation of $1,225.
c. Clem paid self-employment tax of $15,200 (the employer portion is $7,600), and Wanda had $5,700 of Social Security taxes withheld from her pay.
d. Clem paid $131 to rent a safe deposit box to store his coin collection. Clem has collected coins intermittently since he was a boy, and he expects to sell his collection when he retires.

Answer 1

a) Clem can deduct the $1,005 that he spent on tools and supplies. If they file their taxes jointly, they can also deduct the $4,570 spent on health insurance.

b) Both utilities and depreciation are deductible from their rental income = $1,750 + $1,225 = $2,975

c) The employer portion of self-employment taxes is deductible = $7,600. Wanda's social security payments are not deductible.

d) This a personal expense and it is not deductible.