[12tang]

There is a question in becker that asks what are the itemized deduction for AMT and out of the list, they chose Medical expenses exceeding 10%, qualified housing and resident mortgage interest and charitable contributions. I thought home mortgage interest was okay and Tim also said charity is not an add back for AMT. Am I missing something here?

Using Becker self-study
FAR: (82) 175 hours - 1st attempt
BEC: (XX)
AUD: (69) 45hrs of study - 1st attempt
REG: (XX)

[lswang]

The question isn't asking for add backs. It's asking for the deductions that are allowable for AMT. Medical expenses subject to the 10% AGI limitation (which is no change for people <65 years old, and an add back of 2.5% AGI for 65+), charitable contributions, and qualified housing interest are all generally deductible for the calculation of AMT.

FAR | 81 - July 21 15
REG | 66 - Oct 1 15 | 87 - Jan 7 16
AUD | 90 - Oct 29 15
BEC | 86 - Nov 25 15

[marqzho]

It's just two opposite sides of a coin.

when calculate AMT, Taxes/ equity loan/ Misc2% item/ Standard deduction/ exemption/ medical expense subject to 7.5% are not allowed to deduct. So all the items need to add back in the calculation of AMT from taxable income.

On the other side, Charitable contribution/ Qualify mortgage/ medical expense subject to 10% are okay to deduct in calculate AMT, so they don't need to add back in the calculation of AMT from taxable income.

For medical, AMT only allow to deduct the expense subject to 10%. So if you have expense subject to 7.5%. you have to add back 2.5% agi in the calculation of AMT from taxable income.

Eg. AGI=100000 medical expense=50000, taxpayer medical is subject to 7.5% AGI
So, on Sch A, he can deduct 50000-(100000*7.5%)=7500
on AMT, subject to 7.5% is not allowed but 10% is allowed, So we add back 2.5% AGI =2500 to the calculation 🙂

REG 90
FAR 95
AUD 98
BEC 84

[Anonymous]

rememeber the word Simple Pie to rememeber the adjustement for AMT. Rememeber you start with regular taxable income and then

S- Standard deduction not allowed meaning you must add back for amt
I- Interest on equity loan are added back unless it used to acquire, improve your primary home. So as you said morgagate interest should addded back unless it is used to build, improve primary residence.
M- Medical above 10% are not allowed and added bacl for amt
P- PERSONAL EXEMPTION ARE ADDED BACK BECUASE THERE IS OTHER EXEMPTION FOR AMT
L- local state tax on personal property
e- employee business expenses above 2% thrushold are added back

[12tang]

So in this problem, the taxpayers AGI is 100k. It doesn't say he's older than 65. His charitable contrib is 5k. His medical expenses is 12k. Home equity mortgage interest (used for personal debts) is 4.5k. Qualified home mortgage interest is 10k. Real estate taxed is 4.5k. State tax is 4k.

The answer is 17k. So for the med. exp., he deducts the amount over 10% AGI? This is confusing to me because in the book, it says “Itemized deductions – Always adds to regular taxable income”, then below, says “medical expenses must exceed 10% agi”. To me, this implies the amount over 10% is an add back… ARGH, why isn't this sticking..

Using Becker self-study
FAR: (82) 175 hours - 1st attempt
BEC: (XX)
AUD: (69) 45hrs of study - 1st attempt
REG: (XX)

[marqzho]

Charity/ Qualify mortgage/ Medical Expense Subject to 10% are ok to deduct in calculating AMT

Don't know which part isn't sticking =)

REG 90
FAR 95
AUD 98
BEC 84

[lswang]

Lol I literally did this question on Ninja a few hours ago. 🙂

Medical expenses must be over 10% of AGI to have a deductible portion. So just like regular tax, the deductible portion of medical expenses in this question is $2000. So the $2000 is deductible for AMT, and you don't have to add it back to alternative minimum taxable income. For people over 65, the regular tax limitation is only 7.5%. For AMT, the limitation is 10% across the board. So if this person in the question were over 65, then the regular medical deduction would be $4500. You would have to add back the $2500 for AMT calculation.

I'm sorry I'm not too great at explaining this. I hope it helps…

FAR | 81 - July 21 15
REG | 66 - Oct 1 15 | 87 - Jan 7 16
AUD | 90 - Oct 29 15
BEC | 86 - Nov 25 15

[12tang]

Ah, I get it now. I was looking into that text way too hard. Plus, I think I broke my brain for the day. Been in the books most of the day… Thanks everyone!

On the plus side come exam day, I'll remember this post 🙂 But of course because I now know it, it won't show up on my exam.. Isn't that how this stuff goes? Haha

Using Becker self-study
FAR: (82) 175 hours - 1st attempt
BEC: (XX)
AUD: (69) 45hrs of study - 1st attempt
REG: (XX)

[Author]

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