During the current year, Deborah Baronne, a single individual, paid the following amounts:
Federal income tax $10,000
State income tax $4,000
Real estate taxes on land in France $1,500
Real estate taxes on land in U.S. $1,700
State sales taxes $2,000
State occupational license fee $ 600
How much can Deborah deduct in taxes as itemized deductions?
3500
To determine the amount Deborah can deduct in taxes as itemized deductions, we need to consider the different types of taxes she paid and the IRS guidelines for deductibility.
1. Federal Income Tax: The federal income tax paid by Deborah is not deductible as an itemized deduction. This is because the IRS does not allow individuals to deduct federal income taxes paid on personal income.
2. State Income Tax: The state income tax paid by Deborah is deductible as an itemized deduction. She can deduct the $4,000 she paid for state income tax.
3. Real Estate Taxes: Real estate taxes paid on land in both France and the United States are deductible as itemized deductions. Deborah can deduct the total amount of $1,500 for the taxes paid on land in France and $1,700 for the taxes paid on land in the U.S., totaling $3,200.
4. State Sales Taxes: Deborah can choose to deduct either her state income tax or state sales taxes. If she lives in a state with no income tax or had sales tax expenses that exceed her income tax expenses, she can opt to deduct the state sales taxes instead. In this case, if Deborah's state sales taxes paid amount to $2,000 or more, she can deduct that amount as an itemized deduction.
5. State Occupational License Fee: The state occupational license fee paid by Deborah is deductible as an itemized deduction. She can deduct the $600 fee she paid.
To calculate the total amount Deborah can deduct as itemized deductions, you would add up the amounts for state income tax ($4,000), real estate taxes ($3,200), and state occupational license fee ($600). If her state sales taxes paid exceed her state income tax paid, she can include the amount of state sales taxes paid as well.