Question

Jillian is employed as a systems analyst. For calendar year 2020, she had AGI of $120,000 and paid the following medical expenses:

Medical insurance premiums = $3,900
Doctor and dentist bills for Carland Penny (Jillian's parents) = 8,250
Doctor and dentist bills for Jillian = 6,750
Prescribed medicines for Jillian = 300
Nonprescribed insulin for Jillian = 825
Carl and Penny would qualify as Jillian's dependents except that they file a joint return. Jillian's medical insurance policy does not cover them. Jillian filed a claim for $3,150 of her own expenses with her insurance company in December 2020 and received the reimbursement in January 2021. What is Jillian's maximum allowable medical expense deduction for 2020?
a.$16,875
b.$11,025
c.$4,875
d.$8,025
e.$0

Answer 1

Jillian's maximum allowable medical expense deduction for 2020 is $4,875.

Step-by-step explanation:

To determine Jillian's maximum allowable medical expense deduction for 2020, we need to consider the requirements set by the Internal Revenue Service (IRS).

Medical expenses are deductible if they exceed 7.5% of the taxpayer's adjusted gross income (AGI). For Jillian, this would be 7.5% of $120,000, which is $9,000.

However, only qualified medical expenses can be included in the deduction. In this case, the qualified medical expenses include Jillian's own doctor and dentist bills ($6,750), prescribed medicines ($300), and nonprescribed insulin ($825), totaling $7,875.

Therefore, Jillian's maximum allowable medical expense deduction for 2020 would be the amount that exceeds 7.5% of her AGI, which is $7,875 - $9,000 = $4,875. Therefore, the correct answer is option c. $4,875.