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In: Accounting

Debby, age 45, incurred the following medical expenses this year. Payments to physicians and dentists $4,300...

Debby, age 45, incurred the following medical expenses this year.

Payments to physicians and dentists $4,300

Payment for two-day stay at Mercy Hospital $6,250

Payments to physical therapist $2,100

Prescription drugs $1,010

Debby's insurance company reimbursed her for $8,800 of these expenses. If Debby's AGI is $35,400, compute her medical expense deduction.

A. $1,320 B. $13,660 C. $10,120 D. $0

Solutions

Expert Solution

Medical expenses allowed for deduction will include all type of medical expenses paid out of pocket and reimbursement of any expense from insurance company will be disallowed. Tax payers can deduct medical expenses that exceeded 10% of their adjusted gross income.

In the given case, total medical expenses eligible for deduction to Debby after adjusting reimbursement from insurance company is calculated as follows:-

Payments to physicians and dentists $4,300
Add: Payment for two-day stay at Mercy Hospital $6,250
Add: Payments to physical therapist $2,100
Prescription drugs $1,010
Total eligible medical expenses $13,660
Less: Reimbursed from insurance company ($8,800)
Medical expenses out of pocket $4,860

Medical Expense deduction = Medical Expense allowed - 10% of Debby's AGI

= $4,860 - ($35,400*10%)

= $4,860 - $3,540 = $1,320

Debby's medical expense deduction is $1,320.

Therefore the correct option is A) $1,320.

ekkarill92 answered 1 year ago
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