1. Chapter 9 Deductions and Losses: Itemized

2. Personal Expenditures Ordinarily not deductible Legislative grace (e.g., charitable, medical, taxes) Mileage: 12¢ (medical); 12¢ (moving); 14¢ (charitable); 36¢ (business) (2003)

3. Medical Expenses Defined broadly; not cosmetic Capital expenditures Mileage: 12 cents Insurance premiums Subtract Reimbursements S/E (Self Employed) - see below

4. Taxes Deductible taxes –Schedule A v. C Income taxes on A: itemized, various payments (w/h, est, with/ret, ext, audit) refunds on p.1 1040 if tax benefit

5. Interest Expense Types: –personal, business, investment, passive, tax exempt, prepaid, home mortgage –home mortgage - 2 residences, acquisition indebtedness, home equity loans, points

6. Charitable Contributions Gift - benefit received, services Recordkeeping - >250, not just check – deduc: value of goods, services to donee – appraisal and forms 500-5000 Form 8283 –>5000 - appraisal (e.g. stk) + summary –>20000 attach appraisal –Mileage: 14¢

7. Limits Ordinary income property, capital gain property (see below) 50% AGI ceiling, 30% AGI Ceiling (see below)

8. Schedule A Itemized Deductions: miscellaneous subj 2% and other misc Overall Limit on Certain Itemized Deductions - not medical, investment interest, casualty, wagering - 3% x (AGI - threshold) Limit 80%: of covered itemized maybe limited

9. Chapter 9 Charitable Rules Recap: Limits on Charitable Contribution Deducs

10. Ord inc Prop - FMV is normal deduction – reduce by OI component (inventory, STCG, depreciation recapture) CG Prop - –FMV is normal deduction - Reduce by LTCG if TANGIBLE personal property put to unrelated use (not stock, not realty) –AMT

11. 50% AGI Ceiling If to public charit, priv op, priv nonop (spec rules priv nonop: –2 1/2 mos to pub or priv op –pooled fund)

12. 30% AGI Ceiling –Apprec’d CG Prop (to a 50% org) - Election –(if cash or OI prop to priv nonop foundat) –Election re CG Prop - forego apprec in deduc, 50% limit

13. 20% AGI Ceiling - apprec’d CG prop to priv nonop foundat) Interaction of Limits (e.g. –50% 1st –30% limited to 30% and added to 50% –total w/i 50%

14. Priv nonop foundat = not priv op foundat priv op foundat = spend substan all inc in charit undertkg

15. Self-Employed Medical Insurance Premiums The deduction for AGI for health insurance premiums of self-employed individuals and their spouses and dependents is increased to 100%. The increase is phased-in over several years as follows:

16. S/E health insurance (above the line) Taxpayer Relief Act of 1997 –199740% –199845% Tax & Trade Relief Act of 1998 –1999 - 200160% –200270% –2003100%

17. Elimination of Overall Limitations Certain Itemized Deductions EGTRRA ‘01 Current Overall Limitation Reduced 2006 – 2007 1/3 2008 – 2009 2/3 2010 & after100%