Question

1. Paul incurred $25,670 in legitimate, out-of-pocket medical expenses during the current year. His adjusted gross income amounted to $83,560 this year, and he received a partial reimbursement of $9,412 from his insurance company. How much is his itemized deduction for medical expenses?

2. Amy is a single taxpayer living in Forest Hills, New York, with adjusted gross income of $69,057. Her employer withheld $7,761 in federal income tax, $4,901 in state income tax, and $2,709 in local income taxes from her salary. The real estate taxes on her home are $2,058 and her personal property tax based on the value of her car is $371. Also, she paid $2,638 in state sales taxes for the year. Assuming she elects to itemize her deductions, how much may Amy deduct on Schedule A of Form 1040 for taxes paid? show calculation below

Answer 1

Required 1

Itemized deduction for medical expense

Particulars	Amount
Amount paid for medical expenses	$         25,670
Amount reimbursed by insurance company	$           9,412
Unreimbursed portion of medical expenses	$ 16,258
Less: 10% of AGI	$           8,356
Amount in excess of 10% of AGI	$           7,902

Therefore, Itemized deduction for medical expense = $7,902

Required 2

Itemized deduction for taxation paid

Particulars	Amount
State Income tax	$           4,901
Local Income tax	$           2,709
Real estate taxes	$           2,058
Personal property taxes	$              371
Total	$        10,039
Maximum deduction	$        10,000

Note: State sales taxes have not been considered because only either of the state/local income tax OR state/local sales taxes allowed, Not both.

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