In: Economics
Question 1 : Bill has gross income of $130,000. He has above-the-line deductions equal to $20,000. He has itemized expenses, other than medical expenses, in an amount that exceeds the standard deduction. His unreimbursed medical expenses are $25,000. Based on his calculation Bill may deduct these medical expenses, as an itemized deduction, in the amount of $16,75. A – Assuming that this is for year 2018 , what is Bill’ AGI? B- List 5 different types of deductions he could have had that would increase his medical deduction.
Answer (1): Average Gross Income of AGI refers to the total income that a person receives during a month without any type of tax deductions done on his income. That is, gross average income refers to the total income earned by an individual during a year divided by 12. Let us therefor, calculate the AGI for Bill for the year 2018:
= Gross Income / 12
= $130,000 / 12
= $10,833.33
Therefore, Bill’s AGI is $10,833.33.
Medical conditions are uniquely related to the health of a consumer and therefore, the expenses related to the medical condition of a consumer are variedly unique. Medical expenses are a critical part of the deductions claimed by a tax payer. While, we usually are aware of only one way of paying the medical tax’s, there can be different types of medical expenses that can be added to make up the total medical expenses. Let us discuss the different types of medical expenses that be accrued to medical expenses: Travel expenses going to and coming back from medical treatment, the long term care insurance payments from the already taxed income, medical treatments which are uninsured, Agreement for Health Reimbursement also called as Health Reimbursement Arrangement, Bank Account specifically made for flexible medical spending etc. These medical expenses can be added up to the already existing normal medical expenses and there the medical bills an be increased thereby increasing the decurion of medical expense.