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Itemized Deductions (LO. 4)
Kweisi incurs the following employment-related expenses during the year:
|
His employer maintains an accountable reimbursement plan and reimburses him $4,365 for his expenses. He also has $1,600 of other allowable miscellaneous expenses.
Note: Round your answers to the nearest whole dollar.
a. If his adjusted gross income is $53,700 then his allowable deduction is $.
b. Assume the same facts as in part a, except that Kweisi’s employer has a nonaccountable reimbursement plan and Kweisi receives $4,365 from the plan to pay for his business expenses. His allowable deduction is
Expert Answer
- adjusted gross income : $53,700
| $ | |
| Airfare | $1,880 |
| Lodging | $1,480 |
| Meals | $1,320 |
| Entertainment | $640 |
| Incidentals | $500 |
| Total expenses | $5,820 |
| Reimbursed expenses | $4,365 |
| Unreimbursed portion | $1,455 |
| % of unreimbursed portion | 25% |
| ($1435/$5820) | |
| Kwesi is subjected to 50% limit on meals and | |
| entertainment for itemized deductions | |
| $ | $ | |
| Airfare | $1880*25% | $470 |
| Lodging | $1480*25% | $370 |
| Meals | $1320*25%*50% | $165 |
| Entertainment | $640*25%*50% | $80 |
| Incidentals | $500*25% | $125 |
| Unreimbursed employee expense | $1,210 | |
| Add: Miscellaneous itemized deductions | $1,600 | |
| Allowable miscellaneous deductions | $2,810 | |
| Less: 2%*$53700 | $1,074 | |
| Allowable itemized deduction | $1,736 | |
b.
| If the plan is unaccountable | ||||
| If the plan is unaccountable, reimbursement should be included in gross income | ||||
| ($53700+$4365)= $58065 | ||||
| Expenses are deducted as itemized deductions subject to 50% deduction on meals and entertainment | ||||
| Kwesi can deduction costs only subject to 2% adjusted gross income limitation | ||||
| $ | ||||
| Airfare | $1,880 | |||
| Lodging | $1,480 | |||
| Meals (1320*50%) | $660 | |||
| Entertainment (640*50%) | $320 | |||
| Incidentals | $500 | |||
| Total Itemized deduction | $4,840 | |||
