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Page 18 of 63 |
What are "miscellaneous itemized deductions"? Are they a "catch-all"? |
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Miscellaneous itemized deductions are allowable only to the extent they exceed 2% of adjusted gross income. Miscellaneous itemized deductions means the deductions for interest, taxes, losses, charitable contributions, and medical expenses, among others.
In addition, if a taxpayer has adjusted gross income, in 2006, in excess of $150,500 indexed for inflation, the allowable deductions are reduced by the lesser of:
(1) 3% of the excess of adjusted gross income over the applicable dollar amount, or
(2) 80% of those deductions.
As a practical matter, the effect of this is to reduce the amount of deductions allowable by 3% of the excess adjusted gross income. The 3% rule does not apply to medical expenses, deductions for investment interest, casualty losses, and gambling losses (the latter being deductible only to the extent of gambling income).
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