Summary: Reg M5-M7

Read the summary and the most important questions on REG M5-M7

• 5 Standard Deduction and Itemized Deductions

• 5.1.2 Standard Deduction: Dependent of Another

• Does being claimed as a dependent affect your standard deduction?

  Yes. A dependent’s standard deduction is calculated under special rules based on earned income, remains subject to the regular standard deduction limit, and may still include additional amounts for being age 65 or older or blind.

• 5.1.3 Charitable Contributions Deduction If the Standard Deduction Is Taken

• How does taking a standard deduction affect one's ability to deduct charitable contributions?

  Individual taxpayers who do not itemize deductions are allowed to take a deduction of up to $1,000 for cash contributions to public charities

• 5.2.1.1 Payments

• Whose medical expenses may a taxpayer deduct, and what special dependency rules apply?

  
  The taxpayer may deduct medical expenses paid for themselves, their spouse, or a dependent they supported by more than half. 
  
  For this purpose, the dependent’s gross income and joint-return tests are disregarded, but the other dependency tests still apply.

• 5.2.1.2 Timing of Deduction

• What sort of medical expenses payment methods are potentially deductible?

  • Paid (cash or check) amounts during the year.
  • Amounts charged to a credit card during the year (regardless of when paid).
  • Payments made for a deceased spouse (deductible in the year paid)

• 5.2.1.3 Calculation of Deductible Medical Expenses

• How does one calculate a qualified medical expenses deduction?

  Aggregate qualified medical expenses are deductible to the extent that they exceed medical insurance reimbursement and 7.5 percent of AGI

• 5.2.1.4 Types of Deductible Medical Expenses

• What types of medical expenses are included in the definition of medical expenses for tax purposes?

  Medical expenses include:
  

  • Medicine and prescription drugs, including Medicare part D premiums
  • Doctors
  • Medical insurance premiums
  • Medically necessary surgery
  • Transportation to medical facility: Actual costs, or Allowance
  • Expenses incurred by the physically disabled for the removal of structural barriers in their residences to accommodate a disability

• 5.2.2 State, Local, and Foreign Taxes

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• When are deductible taxes generally deductible for cash-method taxpayers?

  Deductible taxes are generally deductible in the year paid.

• When are taxes generally deductible for accrual-method taxpayers?

  Taxes are generally deductible in the year in which they accrue.

• What happens to the SALT deduction if MAGI exceeds $505,000 in 2026?

  If MAGI exceeds $505,000, the deduction gets phased out by 30 cents for every dollar MAGI exceeds this threshold; however, the deduction may not be reduced below $10,000.

• Are foreign real property taxes deductible?

  Foreign real property taxes, other than those incurred in a trade or business and those incurred with respect to property held as an investment, are not deductible.