Question

Angel is single with no dependants. For 2020 his net income for tax purposes was $80,000, his Taxable Income was $70,000 and his medical expenses tax credit was $300. How much were his eligible medical expenses?

1) $4400

2) $4100

3) $4397

4) $4352

Answer 1

Ans: The correct option is $4397

Medical expenses for the taxpayer are claimed on line 33099 of the Federal tax return. The amount that can be claimed as deduction is the amount in excess of the lesser of $2397 (for 2020) or 3% of the net income (line 23600). Federal tax credit rate is 15% of non refundable tax credit as per Federal Government (lowest).

Taxpayer - Angel

Status - Single

Tax year - 220

Federal METC Calculation:

Net Income For tax purposes line 23600	$80000
Taxable income	$70000

METC Threshold- Lesser of
-Medical expenses threshold (2020)	$2397
-3% of Line 23600 ($80000 x 3%)	$2400
Lower of the above is	$2397

Medical expenses tax credit is $300. And Federal tax credit rate is 15%. By doing back calculations, we can get the amount of medical expenses eliguble for tax credit as follows:

Medical expenses for tax credit - $300 / 15% = $2000

METC threshold calculated above is $2397

therefore, Medical expenses will be = (Medical expenses threshold + Medical expenses eligible for tax credit)

= $2397 + $2000

Medical expenses = $4397

We can cross verify as follows:

Medical expenses	$4397
Less: METC thresold	($2397)
Medical expenses for tax credit	$2000
Federal Tax credit rate	15%
Tax credit ($2000 x 15%)	$300

Note- METC thresold for 2019 was $2352