[Anonymous]

Using Becker self-study and the wording in the book is so confusing. It states…

“Medical Expenses must exceed 10 of AGI (Adjustment for taxpayers age 65 and over.) No Adjustment needed for taxpayers under age 65.”

But then in this MCQ:

Robert had current-year adjusted gross income of $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 personal debts) 4,500

Charitable contributions (cash) 5,000

What are Robert’s itemized deductions for alternative minimum tax?

a. $17,000

b. $19,500

c. $25,500

d. $21,500

Explanation

Choice “a” is correct. Robert’s itemized deductions for alternative minimum tax purposes are calculated as follows:

Medical expenses (exceeding 10% of AGI) 2,000

State income taxes (not allowed) −

Real estate taxes (not allowed) −

Qualified housing and residence interest 10,000

Home equity mortgage interest (not used to buy, build, or improve the home-not allowed) −

Charitable contributions (no difference) 5,000

Alternative Minimum Itemized deductions 17,000

---

Also, in another MCQ they use 7.5% for taxpayers over the age of 65 as the amount to add back for the adjustment … this confuses me because the book says 10%.

So my questions are:

1.) Why is medical expenses in excess of 10% an adjustment for 65 and older if they use 7.5% in the MCQ?

2.) Are medical expenses and add-back or an allowable itemized deduction in regards to taxpayers 65 and under?

[jeff]

I think you're confusing a normal itemized deduction question and an AMT question.

AMT uses 10%

Normal uses 10% – unless they are 65 (7.5%)

So – there is only a difference for AMT in regards to medical expenses if they are 65 or older.

AUD - 79
BEC - 80
FAR - 76
REG - 92

Jeff Elliott, CPA (KS)
NINJA CPA | NINJA CMA | NINJA CPE | Another71

[leglock]

Becker does a horrible job on how they phrase this in the book.

You are ONLY allowed to take as a deduction for amt, meaning no add back, all medical in excess of 10% no matter what your age is. For regular tax, you are allowed to tax a deduction for the amount in excess of 10%, but if you are 65 or older, you can deduct the amount above 7.5%. This special rule does not exist for amt. Therefore, if the person is 65 or older, for amt, you will need to addback the difference between 10% and 7.5%.

should also note to be careful on what the question is asking. Allowable deduction for amt is asking one thing, whereas addback for amt is essentially saying what items did u take as a deduction for regular tax that are not allowed for amt and therefore must be added back.

[Anonymous]

Thanks Jeff and @leglock that makes sense now. Becker's wording confused me incredibly

[wakefern58]

Thanks for the help here guys but could someone clarify what Becker means for AMT add backs here when it states: “Med expenses must exceed 10% of AGI (adjustment for taxpayers 65+). No adjustment needed for taxpayers under 65.”

Does “no adjustment needed for taxpayers under 65” mean there are NO ADD BACKS for med expenses unless the taxpayer is 65+ (Add back 2.5% to the regular 7.5% to get 10%). There are only ALLOWABLE itemized deductions allowed for AMT which is any amount exceeding 10% of AGI.

Do i have this right?

BEC - 77

AUD - 85

REG - TBD

FAR - Q2

[Namstut]

@wakefern58 here is an easy way to think about it. Taxpayers over 65 are allowed to deduct medical expenses in excess of 7.5% AGI, so they get to deduct more than taxpayers who are under 65. AMT does not differentiate between over/under 65, you can only deduct medical expenses that exceed 10% of your AGI.

Let's say Bob is over 65, his gross income is $60,000. His medical expenses were $15,000. He is allowed to deduct $10,500 for regular tax. 60,000*7.5%=4,500 not deductible.
However, for AMT he can only deduct $9,000 (60,000*10%=6,000 – not deductible). So Bob will have to add $1,500 when calculating his AMT $6,000-$4,500=$1,500

I hope this makes sense.

When the going gets tough, the tough get going.

All Done!!!

AUD 7/6/16 Passed
BEC 9/3/16
FAR TBD
REG TBD

[Author]

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