BUS FPX 4065 Assessment 4 Itemized Deduction Schedule A

Student Name

Capella University

BUS-FPX4065 Income Tax Concepts and Strategies

Prof. Name:

Date

Schedule A Form: A Guide to Itemized Deductions

The Schedule A form helps taxpayers determine whether itemizing deductions or claiming the standard deduction will provide greater tax benefits. By analyzing deductions through Schedule A, taxpayers can potentially reduce their overall tax liability for the year. This document reviews specific categories relevant to itemized deductions for the 2021 tax year, including medical expenses, state and local taxes, paid interest, and charitable contributions.

Taxpayers can deduct certain medical and dental expenses exceeding 7.5% of their adjusted gross income (AGI). This includes costs related to personal protective equipment (PPE), as permitted under IRS guidelines, when purchased through health plans or reimbursement accounts. The Weavers qualify to deduct payments for their health and dental insurance, as well as co-payments and other medical expenses surpassing the 7.5% threshold. Eligible deductions include services such as laboratory work, medical testing, nursing care, and specific medical programs, such as smoking cessation or weight-loss programs for diagnosed diseases. Medical devices and Medicare insurance payments may also be deducted. However, some exclusions apply, such as life insurance premiums, non-FDA-approved drugs, and elective cosmetic surgery unless associated with a deformity or medical condition.

State and Local Deductions

State and local taxes paid during the year are partially deductible under Schedule A. In the Weavers’ case, they paid $12,230 in property taxes; however, the deduction is capped at $10,000, which can be entered on line 7 of the form. Alternatively, charitable donations may be considered for this deduction if directly related.

Paid Interest

The Weavers paid $12,246 in mortgage interest, which qualifies for deduction on line 8a of Schedule A. However, any mortgage-financed expenses for home improvements are excluded from deductible interest calculations.

BUS FPX 4065 Assessment 4 Itemized Deduction Schedule A

Gifts to Charity

Charitable contributions can be deducted if they are properly documented. For the Weavers, their $4,500 in donations requires written acknowledgment from the recipient organization, outlining the donation’s purpose and amount. Deductible items include cash, clothing, vehicles, equipment, and church tithes. Non-cash contributions require additional documentation, including the completion of Form 8283 for items exceeding $500.

Total Itemized Deductions

After totaling all eligible deductions, the Weavers’ itemized deductions amount to $26,746. This figure exceeds the standard deduction limit of $25,000 for their filing status. As a result, they should report $26,746 on line 12a of their 1040 form, maximizing their tax benefit.

Category	Details	Line on Schedule A
Medical/Dental Expenses	Deductions for expenses exceeding 7.5% of AGI, including insurance, co-payments, and specific medical costs.	N/A
State/Local Taxes	Deduction capped at $10,000 for property and state taxes paid.	Line 7
Paid Interest	Deduction for $12,246 mortgage interest paid, excluding improvement expenses.	Line 8a
Charitable Contributions	$4,500 in verified donations, requiring written acknowledgment; non-cash donations need Form 8283.	Line 11a or 11b
Total Deductions	Total itemized deductions of $26,746, exceeding the standard deduction limit of $25,000.	Line 12a

References

Internal Revenue Service (n.d.). Publication 526: Charitable Contributions 2021 Returns. Retrieved from https://www.irs.gov/pub/irs-pdf/p526.pdf

Internal Revenue Service (n.d.). Publication 936: Home Mortgage Interest Deductions. Retrieved from https://www.irs.gov/pub/irs-pdf/p936.pdf