Lesson 4

Deductions andTax Computations

OBJECTIVES

• Identify the correct standard deduction.• Calculate and accurately report itemized

deductions on Schedule A.• Identify the miscellaneous deductions

reported on Schedule A, lines 22 through 22 that are subject to the 2% AGI limitation.

• Complete the Qualified Dividends and Capital Gain Tax Worksheet.

• Explain the process to calculate and report tax liability.

Intake/Interview Process

Form 13614 – Intake and Interview Sheet – Credits Section

Standard Deduction

• Based on the following factors:– Filing Status– Dependency Status– Blindness– Age

Taxable Income Computation

• Taxable income less than $100,000

Itemized Deductions

• Standard Deduction vs Itemized Deductions

• When MFS taxpayer must itemize deductions

Medical Expenses

• Whose expenses• What expenses

– Deductible– Nondeductible

• Long-Term Care Premiums

• New tax law– Medical standard mileage rate

Taxes

• State and Local Income Taxes • Real Estate Tax• Personal Property Tax

Interest

• Home Mortgage• Points• Investment

Contributions

• Recipient• Deductible • Nondeductible

Miscellaneous Deductions on

Schedule A• Expenses subject to the 2% Adjusted

Gross Income (AGI) limitation vs. expenses not subject to the 2% AGI limitation

Total Itemized Deductions

• Work Exercise 6

Taxable Income Computation

• Taxable income less than $100,000

• Qualified Dividends and Capital Gain Tax Worksheet

Quality Review (QR)

Form 8158 – Quality Review Checklist

Adjustments, Deductions, and Credits Section

Lesson Summary

• Standard Deduction or Itemized• Medical Expenses, Taxes, Interest,

Contributions, Miscellaneous Deductions

• Tax Charts• Qualified Dividends and Capital

Gains worksheet

Travel Expenses

• Fully reimbursed• Accountable Plan• Adequate records• Form 2106

Deductible Expenses

• Away from home• Local travel• Meals• Reimbursable Expenses

Reservists

• Temporary Active Duty• More than 100 miles• Form 2106

Other Miscellaneous Deductions

• Worn off-duty?• Uniform allowances• Insignia of rank, corps devices,

epaulets, aiguillettes, and swords• Professional society dues

Educational Expenses

• Qualifications• Deductible Expenses• Education Credits

Business Travel Expenses

• Travel Expenses• Deductible Expenses

– Car, Meal, Home Leave

• How To Report• Form 2106• Foreign Earned Income Exclusion

Military/International Summary

• Travel Expenses• Uniforms• Professional dues• Education• Home Leave