[Anonymous]

(Double post from REG Study Group)

I have a question on a MCQ in Becker based on everyone’s favorite subject….AMT. Here is the MCQ:

Robert had current AGI $100,000 and potential itemized deductions as follows:

Medical expenses (before percentage limitations)……$12,000

State Income Taxes……$4,000

Real Estate Taxes……$3,500

Qualified Housing and Residence mortgage interest……$10,000

Home equity mortgage interest (used to consolidate debt)……$4,500

Charitable contributions (cash)…..$5,000

What are Robert’s itemized deductions for AMT?

The answer is: $17,000 ($2,000 that exceeds 7.5% + $10,000 qualified housing interest + $5,000 charitable contributions).

My question is why aren’t taxes part of the itemized deductions? Don’t they fall within “PANICTIMME”? I’m thinking that it has something to do with the fact this question states his AGI amount and that is now our base. Not sure….any help would be greatly appreciated!

[futureCPA12]

Taxes do fall into PANIC TIMME! Thats why they are not an allowable itemized deduction. Anything in PANIC TIMME needs to be added back as an adjustment. Just like with Medical Expenses you are limited to 10% as opposed to the 7.5% (although now its always limited to 10% which is strange). So that extra 2.5% would be an addback and not included as an itemized deduction.

Hope I could help!

[Anonymous]

Oh! I think the lightbulb is going off…..so the PANICTIMME are add backs to taxable income, only and not AGI???

[futureCPA12]

Yes. AMTI is the adjustments made to your taxable income after all the itemized deductions. And I used to be befuddled by this concept, I think I get it now.

[Author]

Replies