Summary

This lesson discussed when and how to calculate and report the allowable portion of a taxpayer's itemized deductions.

Puerto Rican taxpayers who have exempt Puerto Rico source income and itemize their deductions:

• Must report the allowable portion of their itemized deductions
• Cannot take deductions that apply to exempt Puerto Rico income

If a deduction does not apply to a specific type of income, you must calculate and report its allowable portion:

• To calculate the allowable portion, use this formula:

(Gross income subject to U.S. tax/Gross income from all sources) x Deduction = Allowable portion of deduction

• To report the allowable portion of each deduction, complete Schedule A