Question

Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2019. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2019, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2020. Determine the maximum itemized deduction allowable for medical expenses in 2019.

Answer 1

$800

Step-by-step explanation:

Fred and Lucy's itemized medical expenses are:

doctor and dentist bills + hospital expenses $9,200

minus reimbursements ($4,400)

unreimbursed expenses $4,800

Health insurance premiums $5,000

Prescribed medicines and drugs $3,000

Total medical expenses $12,800

minus 10% of AGI = 10% x $120,000 ($12,000)

Deductible medical expenses $800

Contribution to qualified Health Savings Accounts are deducted directly from the AGI, and should not be included as medical expenses.