ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM | FREE SOLVED ANSWERS
Of the following items, which one does not qualify as an itemized deduction for state and local taxes?
Of the following items, which one does not qualify as an itemized deduction for state and local taxes?
Multiple Choice
- a. State, local, and foreign income taxes.
- b. Real estate taxes on a residence.
- c. Personal property taxes assessed on the value of specific property.
- d. Hotel taxes incurred on personal travel.
Correct Answer: D. Hotel taxes incurred on personal travel.
The item that does not qualify as an itemized deduction for state and local taxes is Hotel taxes incurred on personal travel.
Explanation:
- State, local, and foreign income taxes: These are generally deductible as part of the State and Local Tax (SALT) deduction, though subject to a current limitation of $10,000 per household.
- Real estate taxes on a residence: These are also typically deductible as part of the SALT deduction, subject to the same limitation.
- Personal property taxes assessed on the value of specific property: These taxes, when assessed annually based on the value of personal property, are also generally deductible under the SALT deduction.
- Hotel taxes incurred on personal travel: These are considered personal expenses and are not deductible as an itemized deduction for state and local taxes. The SALT deduction specifically applies to income, sales, real estate, and personal property taxes, not consumption taxes like hotel occupancy taxes incurred for personal reasons.
ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM FREE SOLVED ANSWERS