Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange). Which of the following is a true statement?

A. Both expenditures are deductible for AGI.

B. The tools and supplies are an itemized deduction but the health insurance is deductible for AGI.

C. Neither of the expenditures is deductible.

D. The tools and supplies are deductible for AGI while the health insurance is an itemized deduction.

E. Both expenditures are itemized deductions.

Question

Business

Bryant Hansen

16 December, 09:46

Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange). Which of the following is a true statement?

A. Both expenditures are deductible for AGI.

B. The tools and supplies are an itemized deduction but the health insurance is deductible for AGI.

C. Neither of the expenditures is deductible.

D. The tools and supplies are deductible for AGI while the health insurance is an itemized deduction.

E. Both expenditures are itemized deductions.

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Answers (1)

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Asia Dorsey · Answer 1

"D"

Explanation:

Deductibles from AGI can also be referred to as expenses or cost in the course of preparing income statement. These are the expenses incurred in the course of business transaction that are qualified to be deducted from the gross income to arrive at the Adjusted Gross income. The $525 for tools and supplies qualifies for this purpose as it is is part of the cost for the business.

Itemized deduction are the expenses that tax payers can claim from federal income tax in order to reduce their tax liability. These expenses are listed by the regulatory tax rules in order to control tax evasion acts. It covers the health insurance premium of $3,600 paid by Christine.