PAPER WORK WEEK SEVEN (AC553)
Solution:
(A) ADJUSTED GROSS INCOME: This is a measure of income and it used to establish eligibility for financial benefits. It is calculated as gross income from taxable sources minus allowable deductions. Adjusted gross income is important to individual income taxation because it controls individual qualification for numerous deductions and credits. Besides, it can affect individual eligibility for retirement plans. (B) How does ADJUSTED GROSS INCOME AFFECT: (1) Medical Deduction on Form 1040, Schedule A
Only the part of medical expenses that exceed 7.5% of the amount on Form 1040, line 38 is deductible. To the extent you were not reimbursed, you can deduct the amount you paid for: Prescription medicines or insulin, Medical examination, diagnostic test etc. (2) Miscellaneous Itemized Deduction on Form 1040, Schedule A
This is subject to expense that is more than 2 % of your adjusted gross income. This 2% limit can only be applied after you apply any other deduction limit. For example, unreimbursed employee expenses, Tax preparation fee, and all other expenses that will appear on line 11 of Form 1040. (3) The Deduction for Charity on Form 1040, Schedule A
Donations to charity are tax deductible expenses but subject to limitation.1) you must make an assessment of the fair market value of the property you contribute. 2) You must attach IRS Form 8283 if your total non-cash contribution exceeds $500. 3) If you contribute a car, truck, boat, airplane, or other vehicle, and the vehicle is worth more than $500, you must received a written acknowledgement from the non-profit before you can claim a tax deduction. 4) If you contribute property worth more than $5,000, you must obtain a written appraisal of the property's fair market value. Besides, you can deduct: cash contributions in full up to 50% of your adjusted gross