[CPA CMA]

A friend of mine asked me a tax question, but I’m do audit and I haven’t been really following all those tax code updates. So please help me out, I really appreciate it.

So, she has gross income about $66k and she files jointly with her husband. They had a newborn baby and had over $10k medical bill and prescription drugs. She paid her student loan and worked only 7 month in 2015. Should they take itemized deduction or standard?

Thanks again!

Master of Professional Accountancy (MPA) 12/17/2014

BEC 76 (10/3/14)
FAR 75 (10/24/14)
REG 83 (4/6/15)
AUD 75 (4/20/15)
Anticipated Licensure: August 2016

CMA part 1 passed (6/15/15)
CMA part 2 Passed (9/4/15)
Anticipated Licensure: August 2017

[rosecpa]

Student loans have nothing to do with this. She would be allowed a 2500 for agi deduction for that.

In terms of medical, the 10000 would be reduced by 10% agi which would probably leave them with a 5000 deduction, after considering the items that reduce agi. They really have to analyze the f full picture-do they have home mortgage expenses as well?

[taxgeek83]

Most software systems will automatically calculate both the standard and itemized deductions and take whichever is the most advantageous to the taxpayer. My recommendation is to put everything they have into whatever software they are using and see how it shakes out.

Keep in mind that medical expenses are only deductible if they're paid out of pocket during the tax year. Expenses covered by insurance are nondeductible, nor are medical expenses that are simply accrued throughout the year but not paid.

[GHardesty]

If she files jointly, then her husbands income is necessary to figure out AGI, since the medical deduction on the schedule A is based on AGI. Of course, the schedule A is combined with state taxes, interest, charitable donations, and other misc deductions. Going to have to know those to figure out which option is more favorable. The student loans I think do play a part b/c the interest paid in the current year will reduce AGI (unless phased out). Again, depending on her husband's income. Not enough information.

AUD 80 05/31/16 (1x)
BEC 80 01/16/16 (3x)
FAR 78 11/23/15 (2x)
REG 87 02/29/16 (2x)

[taxsage]

None of the information you gave implies that your friend should itemize. You want to compare the total $6,300/12600(married) total standard deduction with possible itemized deductions such as medical expenses exceeding 10 percent, state and real estate taxes paid, home mortgage interest, casualty losses, and misc expenses and job deductions not reimbursed by their employer. there are a couple of other standard deductions(see schedule A). If the itemized deductions do not exceed the standard deduction then the standard deduction is your choice.

There are a bunch of deductions like 401k, hsa, moving expenses, alimony, etc that do not affect your standard deductions. The complete list can be found on the first page of the 1040. These deductions are called above the line deductions. Below the line deductions are the itemized deductions(again see schedule A).

Exemptions(breeding deductions/care giving) have nothing to do with the decision to itemize.

[Author]

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