REG Individuals: Deductions and Credits, what’s deductible, which credit applies, and when

The rules, one page each

1. Medical Expense Deduction: 7.5% AGI Floor and ReimbursementsWorked example

   Subtract same-year insurance reimbursements from qualified medical expenses first. If you itemize, deduct only the excess over 7.5% of AGI.

2. Medical Expense Deductions: What Counts on Schedule A?Step by step

   Include only qualified, unreimbursed medical expenses not paid with pretax funds, after special limits. The Schedule A deduction is the amount exceeding 7.5% of AGI.

3. Charitable contributions: FMV vs basis, quid pro quo reductions, volunteer costs, and payment timingSort it

   For public charities: long‑term capital gain property is generally deducted at FMV; short‑term or ordinary‑income property is limited to basis. Reduce any payment by the FMV of benefits received. No deduction for the value of services or unpaid pledges. Cash gifts by credit card are paid when charged; checks are paid when mailed.

4. Education credits: AOTC vs LLC, who is eligible and who claims the creditDecision tree

   AOTC is for the first four years of postsecondary education, requires at least half‑time enrollment for an academic period, and cannot be claimed by a student who can be claimed as someone else’s dependent. LLC has no limit on years or half‑time status and can apply to graduate coursework; only the taxpayer claiming the dependent can claim the credit for that student.

5. Education credits: compute the AOTC after scholarships, 529 plans, and December prepaymentsWorked example

   AOTC equals 100% of the first $2,000 of qualified expenses plus 25% of the next $2,000 (max $2,500 per eligible student). Reduce qualified expenses by tax‑free scholarships and grants. 529 plan distributions can be allocated to room and board (qualified for 529 but not AOTC) to preserve AOTC costs. December prepayments for an academic period beginning in the first 3 months of the next year count in the current year.

6. Child and dependent care credit: qualifying person, eligible expenses, limits, employer benefits, and student‑spouse rulesDecision tree

   Eligible expenses must be for care of a qualifying person to enable work. Annual expenses are capped at $3,000 for one qualifying person or $6,000 for two or more, reduced by excluded employer-provided dependent care benefits. Eligible expenses are also limited by the lower‑earning spouse’s earned income; a full‑time student spouse is deemed to have $250 per month of earned income if one qualifying individual or $500 per month if two or more.

7. Other individual deductions and credit rules: timing, tax benefit, eligibility gates, and value of credits vs deductionsSort it

   Apply cash‑basis timing (credit card charges are paid when charged; mailed checks are paid when mailed). The tax‑benefit rule includes a state tax refund in income to the extent of prior‑year benefit. Nonrefundable credits cannot reduce liability below zero; a dollar of credit beats a dollar of deduction at typical brackets. Above‑the‑line special rules require strict eligibility (HSA, student loan interest, self‑employed health insurance). Points on a refinance are amortized unless for home improvements.