Question

Valentino is a patient in a nursing home for 45 days of 2020. While in the nursing home, he incurs total costs of $20,520. Medicare pays $12,312 of the costs. Valentino receives $22,572 from his long-term care insurance policy, which pays while he is in the facility. Assume that the Federal daily excludible amount for Valentino is $380.

Of the $22,572, what amount may Valentino exclude from his gross income?

Answer 1

Answer to the above question:

• To Determine

Identify the amount excluded from Gross income.

• Explanation of Solution:

Gross Income Exclusions: Congress has enacted sections 101 through 140 for the authority to exclude certain items like gifts, gain from sale of principal residence, amounts received for higher education, compensation received for physical injury, disaster relief payment under qualified disasters and amount received under different circumstances, to be excluded from computation of gross income.

Calculate the amount excluded from gross income.

Particulars	Amount
Exclusions:
Daily excludible amount in 2020 (1) ($380*45)	$ 17,100
Actual cost of care insurance (2)	$ 20,520
Whichever is higher (1) or (2)	$ 20,520
Less: Amount received from Medicare	$ 12,312
Equal amount of exclusion	$ 8,208
Thus: Valentino must include ($ 22,572 - $ 8,208) = $ 14,364 of the long - term care benefits received in his gross income.