Question

Egor paid the following expenses in 2021:

!"$1,500 for insulin to control his Type 1 Diabetes
!"$5,500 in medical insurance premiums for himself and his family (spouse and one dependent
child)
!"$500 in copayments for doctor's visits
!"$1,000 for his spouse's gym membership to improve her overall health
Egor drove 1,000 miles to attend the doctor's appointments.
What amount of medical expenses can Egor deduct as an itemized deduction in 2021 if his 2021
AGI is $75,000?
What amount of medical expenses can Egor deduct as an itemized deduction in 2021 if the insulin
and copayments paid/reimbursed through funds Egor contributed to an HSA? What is an HSA? If
Egor contributed 2021 HSA contributions affect Egor's AGI and taxable income?
Assume Egor contributed $3,000 to an HSA in 2021 ($75,000 AGI is before HSA contribution), but
did not use the HSA funds to pay for the medical expenses. What amount of the 2021 medical
expenses could Egor deduct as an itemized deduction in 2021?

Answer 1

Egor can deduct a total of $5,000 in medical expenses as an itemized deduction in 2021 if his 2021 AGI is $75,000. This is because the total medical expenses ($8,500) are greater than 7.5% of Egor's AGI ($5,625). The amount deductible as an itemized deduction would be the excess over 7.5% of his AGI, which is $2,875 ($8,500 - $5,625).If the insulin and copayments paid/reimbursed through funds Egor contributed to an HSA, Egor cannot deduct any medical expenses as an itemized deduction because the amounts were paid for by pre-tax contributions to the HSA. HSA stands for Health Savings Account. It is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan. Contributions to an HSA are tax-deductible and can be used to pay for qualified medical expenses without being taxed.Assuming Egor contributed $3,000 to an HSA in 2021 ($75,000 AGI is before HSA contribution), but did not use the HSA funds to pay for the medical expenses, he would be able to deduct $2,500 of the medical expenses as an itemized deduction in 2021. This is calculated as the total medical expenses ($8,500) minus the HSA contribution ($3,000), minus 7.5% of his AGI ($5,625), which equals $2,500.