Question

If an insurance company reimburses the insured for medical expenses, can the insured deduct that amount from their federal income tax?

a) Yes, always
b) Yes, but only under certain circumstances
c) No, never
d) No, unless it's specified in the policy

Answer 1

Yes, but only under certain circumstances. The insured can deduct the reimbursed amount from their federal income tax if the medical expenses exceed a certain percentage of their adjusted gross income. The answer to the question is b) Yes, but only under certain circumstances.

Step-by-step explanation:

The answer to the question is b) Yes, but only under certain circumstances. The insured can deduct the reimbursed amount from their federal income tax, but there are specific conditions that need to be met.

For medical expenses to be deductible, they must exceed a certain percentage of the insured's adjusted gross income. Currently, for most taxpayers, the threshold is 7.5% of their AGI. So, if the total medical expenses exceed 7.5% of the AGI, the insured can deduct the amount that exceeds this threshold.

It's important to note that different rules may apply if the insurance plan is a Health Maintenance Organization (HMO), as the payments to the HMO may be considered as prepaid medical expenses, which are typically not deductible. The answer to the question is b) Yes, but only under certain circumstances.