Itemized Deductions

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You were contacted by Mr. and Mrs. Smith to help them determine which expenses they can itemize. Below are a list of expenses that you must enter on form schedule A in the appropriate boxes. Not all expenses are itemized deductions. Facts: Mr. Smith is an attorney and Mrs. Smith is an insurance broker. They are married filing jointly. Total income reported on the 1040 is $120,000 and the standard deduction is $24,000. Mr. Smith’s federal withholdings of $18,000 Mr. Smith’s state withholdings of $7,000 Mrs. Smith’s federal withholdings of $17,000 Mrs. Smith’s state withholdings of $6,000 Real estate taxes paid on home of $4,000 Cash Contributions of church $12,000 Clothing donations to charity that cost $3,000 but has a thirst shop value of $300 Contributions to homeless woman totaling $200 Unreimbursed medical expenses of $4,000 Home mortgage interest of $12,000 Interest paid on car loan $3,000 Student loan interest $1,500 Alimony paid to Mr. Smith’s ex-wife for divorce agreement finalized in 2015) totaling $15,000 Tax preparation fees $1,000 Cost to replace roof on personal residence for normal wear and tear $20,000 Unreimbursed cost for Mr. Smith to attend continuing education conference totaling $3,500 Part 2. Calculate Mr. and Mrs. Smith’s taxable income by entering the adjustments from above on a word document. Start with gross income minus adjustments to arrive at adjusted gross income and then subtract itemized deductions. Determine if they should take the standard deduction or itemize deductions to arrive at taxable income. Support your answers with evidence and cite your sources.