Question

Please answer the question below to the best of your knowledge.
For each of the taxpayers, enter the correct amount in the cell in the "Allowable deduction" column.  Enter a zero (0), if the taxpayer is not entitled to a year 2 medical expense deduction.  Enter all amounts as positive values.
                                                                             Taxpayer
 Allowable deduction
Taxpayer                           A
Medical costs reported in year 2 include the following:
·Prescriptions $ 450
Herbal weight loss supplements and vitamins recommended by physician $ 1,200
·Eye examination and eyeglasses $650
· Removal of appendix $2,800
 
 
 
Taxpayer                                 B
Medical costs reported in year 2 include the following:
·         Medical insurance premium paid from after the tax income 1,500
·         Tooth extraction $900
·         Surgery to remove facial wrinkles $3,500
·         Nonprescription drugs $200
·         Hearing aid $2,600 of year 3
·         Receive medical insurance reimbursements of $500 in year 2 and  $200 in January of year 3
 
 
 
Taxpayer                                             C
Medical costs reported in year 2 include the following:
·         Drug rehabilitation expense $4,400
·         Wheelchair purchase $ 800
·         Health club membership fee $700
·         Plastic surgery to correct injuries in an auto accident $7,500

Answer 1

Ans-1-Allowable deduction of Taxpayer A:-

·Prescriptions	$450
·Eye examination and eyeglasses	$650
· Removal of appendix	$2,800
Total	$3,900

Herbal loss supplements and vitamins are not deductible, even if recommended by a physician. Only prescription medication is deductible.

2- Allowable deduction of Taxpayer B:-

Medical insurance premium $1,500
Tooth extraction $900
Hearing aid $2,600
Reimbursements from insurance ($500)
Total Deductible $4,500

Cosmetic surgery to remove wrinkles and nonprescription drugs are not deductible. Only the reimbursements received in Year 2 are subtracted from the deductible amount. The $200 reimbursements received in Year 3 might be included in Year 3 taxable income under the tax benefit rule.

3-Allowable deduction of Taxpayer C-

Drug rehabilitation expenses $4,400
Wheelchair $800
Plastic surgery for injuries $7,500
Total Deductible $12,700

The plastic surgery is deductible because it is required to correct injuries sustained in an accident. The health club membership fee is not deductible.