Clem is married and is a skilled carpenter. Clem's wife, Wanda, works parttime as a substitute grade school teacher. Determine the amount of CLem's expenses that are deductible for AGI this year (if any) under the following independent circumstances:
A) Clem is self-employed and this year he incurred $525 for tools and supplies related to his job. Since neither were covered by a qualified health plan. Wanda paid health insurance premiums of $3,600 to provide coverage for herself and Clem (not through an exchange).
B) Clem and Wanda own a garage downtown that they rent to a local business for storage. This year they incurred $1,250 in utilities and depreciation of $780.

$4,125 only in situation A

Explanation:

Deductions made to reach an individual’s adjusted gross income include:

1. Certain retirement plan contributions, such as individual retirement accounts (IRA), SIMPLE IRA, SEP-IRA, and qualified plans

2. Half of the self-employment tax

3. Healthcare savings account (HSA) deductions

4. Alimony paid (included in the recipient’s gross income)

5. Moving expenses (but since 2018, only if you’re active-duty military moving due to military orders)

6. Losses incurred from the sale or exchange of property

7. Early-withdrawal penalties levied by financial institutions

8. School tuition, fees, and student loan interest (exceptions and limits usually apply)

9. Jury duty pay turned over to a filer’s employer

10. Some business-related expenses incurred by performing artists, teachers, fee-basis government officials, and reservists

Therefore applying to the scenario, we see that Clem is only able to claim deductions in situation A for the total cost incurred because they are covered under categories 3 and 10 above.

A) Clem is self-employed and this year he incurred $525 for tools and supplies related to his job. Since neither were covered by a qualified health plan. Wanda paid health insurance premiums of $3,600 to provide coverage for herself and Clem (not through an exchange).

Hence, the amount of expenses that are deductible are

Tools for self employment - 525

Health Insurance premium - 3,600

TOTAL$4,125

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