5. Seamus is employed as a corporate attorney. In 2019 he had AGI of $57,000 and...

5. Seamus is employed as a corporate attorney. In 2019 he had AGI of $57,000 and paid the following medical expenses.

Medical insurance premiums (withheld on a pretax basis) $4,700

Doctor and dentist bills for Dave and Elaine (Seamus’ parents) $6,800

Doctor and dentist bills for Seamus $5,200

Prescription medicines for Seamus $ 400

Weight loss treatment related to obesity $ 600

Nonprescription insulin for Seamus $ 850

Low Dose Aspirin prescribed by Seamus’ doctor bought over the counter $ 225

Dave and Elaine would qualify as Seamus’ dependents except they file a join return. Seamus’ medical insurance policy does not cover them. Seamus does not expect to receive any reimbursements for the medical expenses identified in this list. Assuming Seamus has $8,000 of other eligible itemized deductions, what is Seamus’ tax benefit related to his maximum allowable medical expense deduction for 2019?

Solutions

Expert Solution

In 2019 Employees are elligible to get a deduction over and above 7.5% of the AGI i.e 57000*7.5%=4275 $

Standard deduction for singles is 12200$ (A)

Step 1 Identifying the expenses which are elligible for deduction or not

a. Medical insurance premiums (withheld on a pretax basis) $4,700- Since it is deducted from the pay before paying taxes it is not allowed as deduction

b. Doctor and dentist bills for Dave and Elaine (Seamus’ parents) $6,800 -Since the parents are depended Seamus can claim the dentist bills of their parents from his income.

c. Doctor and dentist bills for Seamus $5,200- It is allowed as a deduction from the income as per the tax laws

d. Prescription medicines for Seamus $ 400 - Prescription medicines can be claimed as deduction

e. Weight loss treatment related to obesity $ 600- Weight loss treatment (bariatric surgery, approved weight-loss drugs and nutrition counseling services), if it is recommended by a doctor to treat a specific medical condition or to cure any specific ailment or diseaseI can be claimed but here it is not prescribed by doctor so it cannot be allowed as deduction

f. Nonprescription insulin for Seamus $ 850- Non prescription drugs cannot be claimed as deduction except insulin so insulin can be allowed as deduction

g. Low Dose Aspirin prescribed by Seamus’ doctor bought over the counter $ 225- cannot be allowed as deduction if you want to claim as deduction you need to obtain a lettter from the doctor that it is prescribed for some special reason.

So total deduction available = 6800+5200+400+850+8000 = 21250$

Deduction elligible if we elect to itemize= 21250-4275$= 16975$ (B)

So if Seamus opt for standard deduction then he can get deduction of 12200$ but if he opt for itemwise then he is elligibe for maximum claim of 16975$ as deduction

ekkarill92 answered 1 year ago

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