Calculating the Allowable Portion

Case Study

Juan and Judith are residents of Puerto Rico under age 65 who use the Married Filing Jointly filing status. Juan earned $39,780 working for the federal government during this tax year. Judith made $19,520 from her job at a bank in Puerto Rico.

They have a total of $16,223 in itemized deductions that do not apply to a specific type of income.

The formula for calculating the allowable portion of a deduction is:

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

What is the allowable portion of each of these deductions?

Expense	Amount	Allowable Portion of Deduction
Medical and dental expenses	$3,457	?
Real estate taxes	$1,200	?
Mortgage interest on their home	$9,480	?
Charitable contributions (cash)	$2,086	?

Think about it: Based on Juan and Judith’s information, will they have a greater benefit if they claim the itemized or standard deduction?