Cal reported the following itemized deductions on his 2014 tax return.His AGI for 2014 was $85,000.The mortgage interest is all qualified mortgage interest to purchase his personal residence.For AMT,compute his total itemized deductions.
A) $0.
B) $17,700.
C) $25,700.
D) $33,600.

Question

Cal reported the following itemized deductions on his 2014 tax return.His AGI for 2014 was $85,000.The mortgage interest is all qualified mortgage interest to purchase his personal residence.For AMT,compute his total itemized deductions. 
A) $0. 
B) $17,700. 
C) $25,700. 
D) $33,600.

Quizplus · Accepted Answer

For AMT purposes, some itemized deductions are adjusted or disallowed. Medical expenses are not subject to adjustment or disallowance. Therefore, $10,500 medical expenses remain the same. In addition, the property tax deduction is fully allowed for AMT purposes, as it is a tax expense. Therefore, $5,000 property tax deduction is not subject to any adjustment. However, the mortgage interest deduction is subject to adjustment. The AMT adjustment requires that only mortgage interest used to purchase, construct, or improve the taxpayer's primary or secondary residence is allowed. Therefore, Cal's mortgage interest deduction of $16,200 must be adjusted by excluding $5,500 of interest on the loan used to refinance his home. Thus, Cal's total itemized deductions for AMT purposes are $10,500 medical expenses + $5,000 property taxes + $10,700 qualified mortgage interest = $26,200. However, for AMT purposes, the standard deduction is $52,800 (married filing jointly), which is higher than the itemized deduction. Therefore, the AMT adjustment does not reduce Cal's tax liability in this scenario.

Cal Reported the Following Itemized Deductions on His 2014 Tax