Carl, age 46, and Monica, age 42, are married and will file a joint return. They
ID: 2585808 • Letter: C
Question
Carl, age 46, and Monica, age 42, are married and will file a joint return.
They have two children, Adriane and Robert, whom they will claim as dependents on their joint return.
Monica's cousin, Michael (age 29), came to live with them in July 2017. Michael's gross income was $4,300. Monica and Carl did not provide over one-half of Michael's support for the year but did pay $600 of Michael's medical bills in November 2017.
Carl was enrolled all year in an HDHP with family coverage.
Carl has had an HSA for four years. He has no other health insurance.
In 2017, Carl made regular contributions to his HSA totaling $4,000.
$300 to purchase Monica's eyeglasses (needed for medical reasons).
$725 for long-term care insurance for Carl.
$250 for over-the-counter eye medicine for their son, Robert (no prescription from doctor).
$525 for Adriane's physical therapy sessions.
Carl, Monica, Adriane, Robert, and cousin Michael are all U.S. citizens and have valid Social Security numbers.
Carl, age 46, and Monica, age 42, are married and will file a joint return.
They have two children, Adriane and Robert, whom they will claim as dependents on their joint return.
Monica's cousin, Michael (age 29), came to live with them in July 2017. Michael's gross income was $4,300. Monica and Carl did not provide over one-half of Michael's support for the year but did pay $600 of Michael's medical bills in November 2017.
Carl was enrolled all year in an HDHP with family coverage.
Carl has had an HSA for four years. He has no other health insurance.
In 2017, Carl made regular contributions to his HSA totaling $4,000.
In 2017, Carl took $1,800 from his HSA to pay the following medical expenses:$300 to purchase Monica's eyeglasses (needed for medical reasons).
$725 for long-term care insurance for Carl.
$250 for over-the-counter eye medicine for their son, Robert (no prescription from doctor).
$525 for Adriane's physical therapy sessions.
Carl, Monica, Adriane, Robert, and cousin Michael are all U.S. citizens and have valid Social Security numbers.
9. The adjustment to income on Form 1040, line 25 for Carl's HSA deduction is: A. $1,800 B. $3,400 C. $4,000 D. $6,750Explanation / Answer
Taxpayers must be covered by a high-deductible health plan (HDHP) to take advantage of HSA.
An HDHP generally has lower premiums than traditional health care coverage.
An HDHP is health coverage with
a: • Higher annual deductible than typical health plans and
b• Maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that the taxpayer must pay for covered expenses. Out-of-pocket expenses include copayments and other cost sharing but do not include premiums.
Medical Expenses are covered or reimbursed under High Deductible health plan.
Whose medical expenses qualify?
Qualified medical expenses are those incurred by the following persons: • The taxpayer and spouse • All dependents claimed on the tax return.
Any other person who could have been claimed as a dependent on the taxpayer’s return except that: – The person filed a joint return – The person had gross income of the exemption amount or more, or – The taxpayer or spouse (if filing jointly) could be claimed as a dependent on someone else’s tax return.
Monica's cousin, Michael (age 29), came to live with them in July 2017. Michael's gross income was $4,300. Monica and Carl did not provide over one-half of Michael's support for the year but did pay $600 of Michael's medical bills in November 2017.
One-half = 1/2* $4300 = $2150+$600 (Medical Expensess) = $2750
HSA = $4000+$2750 =$6750
Option D i.e. $6750 is Carl's HSA deduction.
HSA for 4 years $4,000