Simpson is a single individual under 65 who is employed full-time by Duff Corpor
ID: 2427389 • Letter: S
Question
Simpson is a single individual under 65 who is employed full-time by Duff Corporation. This year Simpson reports AGI of $73,800 and has incurred the following medical expenses:
a) Calculate the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations.
b)
Suppose that Simpson was reimbursed for $650 of the physician's charges and $1,820 for the hospital costs. Calculate the amount of medical expenses that will be included with Simpson’s itemized deductions after any applicable limitations.
Dentist charges $ 1,080 Physician's charges 2,140 Optical charges 940 Cost of eyeglasses 725 Hospital charges 3,750 Prescription drugs 375 Over-the-counter drugs 935 Medical insurance premiums (not through an exchange) 1,060Explanation / Answer
If you itemize your deductions for a taxable year on Form 1040, Schedule A (PDF), Itemized Deductions, you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 10% of your adjusted gross income or 7.5% if you or your spouse is 65 or older. The 7.5% limitation is effective only from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. You figure the amount you are allowed to deduct on Form 1040, Schedule A.
Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.
Deductible medical expenses may include but are not limited to the following:
Case -1
As per the above policy the following medical expenses are allowed for deductions
Dentist charges
1080
Physician's charges
2140
Optical charges
940
Cost of eyeglasses
725
Hospital charges
3750
Prescription drugs
375
Over-the-counter drugs
935
Medical insurance premiums (not through an exchange)
1060
Total Medical Expenses
11005
Here Simpson age is less than 65 years
so he is eligible for deduction of 10% of his AGI
10% OF AGI (73800 * 10% )
7380
Here total medical expenses excess of 10% of AGI
Total Medical expenses are allowed for deduction.
Case -2
If he reimbuse 650 from Physicians charges and 1820 for Hospital cost
Total Medical Expenses after the above deductions
Total Medical Expenses
8385
10% OF AGI (73800 * 10% )
7380
Here total medical expenses excess of 10% of AGI
Total Medical expenses are allowed for deduction.
Case -1
As per the above policy the following medical expenses are allowed for deductions
Dentist charges
1080
Physician's charges
2140
Optical charges
940
Cost of eyeglasses
725
Hospital charges
3750
Prescription drugs
375
Over-the-counter drugs
935
Medical insurance premiums (not through an exchange)
1060
Total Medical Expenses
11005
Here Simpson age is less than 65 years
so he is eligible for deduction of 10% of his AGI
10% OF AGI (73800 * 10% )
7380
Here total medical expenses excess of 10% of AGI
Total Medical expenses are allowed for deduction.
Case -2
If he reimbuse 650 from Physicians charges and 1820 for Hospital cost
Total Medical Expenses after the above deductions
Total Medical Expenses
8385
10% OF AGI (73800 * 10% )
7380
Here total medical expenses excess of 10% of AGI
Total Medical expenses are allowed for deduction.