Question 1

Upon the recommendation of a physician, Ed has a swimming pool installed at his residence because of a heart condition.If he is allowed to deduct all or part of the cost of the pool, Ed's increase in utility bills due to the operation of the pool qualifies as a medical expense.

Accepted Answer

According to IRS guidelines, if a swimming pool is installed on the recommendation of a physician and is used primarily for medical reasons, then the cost of the pool (or a portion of the cost) can be deductible as a medical expense. Additionally, the increase in utility bills directly related to the operation of the pool can also be included as a medical expense deduction.

Question 2

Chad pays the medical expenses of his son, James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may claim James' medical expenses even if he is not a dependent.

Accepted Answer

If Chad provides over half of James' support, he may still claim James' medical expenses as long as James does not file a joint tax return and Chad provides more than 50% of James' support. James' earnings do not disqualify Chad from claiming the medical expenses.

Question 3

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Accepted Answer

The election to itemize is appropriate when total itemized deductions are greater than the standard deduction based on the taxpayer's filing status.

Question 4

A taxpayer may not deduct the cost of new curbing (relative to a personal residence), even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

Accepted Answer

The cost of new curbing for a personal residence is considered a personal expense and is not deductible even if it is required by the city and provides an incidental benefit to the public welfare.

Question 5

Phyllis, a calendar year cash basis taxpayer who itemized deductions totaling $20,000, overpaid her 2016 state income tax and is entitled to a refund of $400 in 2017.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2017.She is required to recognize that amount as income in 2017.

Accepted Answer

The answer of Phyllis, a calendar year cash basis taxpayer...

Question 6

Personal expenditures that are deductible as itemized deductions include medical expenses, Federal income taxes, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions.

Accepted Answer

Federal income taxes are not deductible as itemized deductions; however, state income taxes, property taxes on a personal residence, mortgage interest, and charitable contributions are deductible.

Question 7

In 2018, Rhonda received an insurance reimbursement for medical expenses incurred in 2017.She is not required to include the reimbursement in gross income in 2018 if she claimed the standard deduction in 2017.

Accepted Answer

If Rhonda claimed the standard deduction in 2017, she did not itemize her deductions and did not take a tax benefit for the medical expenses. Therefore, she is not required to include the reimbursement of those expenses in gross income in 2018.

Question 8

Maria traveled to Rochester, Minnesota, with her son, who had surgery at the Mayo Clinic.Her son stayed at the clinic for the duration of his treatment.She paid airfare of $300 and $50 per night for lodging.The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.

Accepted Answer

The IRS allows taxpayers to include travel expenses for medical care, such as airfare and lodging (up to $50 per night), as part of their medical expense deduction if the travel is primarily for, and essential to, receiving medical care.

Question 9

Mason, a physically handicapped individual, pays $10,000 this year for the installation of wheelchair ramps, support bars, and railings in his personal residence.These improvements increase the value of his personal residence by $2,000.Only $8,000 of the expenditure qualifies as a medical expense for tax purposes.

Accepted Answer

The value increase of $2,000 cannot be applied towards the medical expense deduction, therefore only $8,000 of the expenditure qualifies as a medical expense for tax purposes.

Question 10

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2017.He expects $5,000 of these expenses to be reimbursed by an insurance company in 2018.In determining his medical expense deduction for 2017, Matt must reduce his 2017 medical expenses by the amount of the reimbursement he expects in 2018.

Accepted Answer

In determining his medical expense deduction for 2017, Matt should not reduce his 2017 medical expenses by the expected reimbursement in 2018. He should calculate his deduction based on the actual expenses incurred in 2017. If he receives the reimbursement in 2018, it may affect his tax situation for that year, not 2017.

Question 11

Bill paid $2,500 of medical expenses for his daughter, Marie.Marie is married to John and they file a joint return.Bill can include the $2,500 of expenses when calculating his medical expense deduction.

Accepted Answer

According to IRS rules, a taxpayer can include medical expenses paid for their child, even if the child is married and files a joint return, as long as the taxpayer can claim the child as a dependent. Therefore, Bill can include the $2,500 of medical expenses he paid for Marie when calculating his medical expense deduction.

Question 12

Shirley pays FICA (employer's share) on the wages she pays her housekeeper to clean and maintain Shirley's personal residence.The FICA payment is not deductible as an itemized deduction.

Accepted Answer

FICA paid by the employer (in this case, Shirley) is not deductible as an itemized deduction.

Question 13

A physician recommends a private school for Ellen's dependent child.Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations).

Accepted Answer

The cost of tuition for private school is not considered a deductible medical expense, even if a physician recommends the school for the child's health or well-being. IRS guidelines specify that medical expenses must be primarily to alleviate or prevent a physical or mental defect or illness.

Question 14

Georgia contributed $2,000 to a qualifying Health Savings Account in the current year.The entire amount qualifies as an expense deductible for AGI.

Accepted Answer

Contributions to Health Savings Accounts are deductible for AGI, meaning they reduce taxable income even if the taxpayer does not itemize deductions. Therefore, the entire $2,000 contribution can be deducted from the taxpayer's income before calculating AGI.

Question 15

In 2017, Dena traveled 600 miles for specialized medical treatment that was not available in her hometown.She paid $90 for meals during the trip, $145 for a hotel room for one night, and $15 in parking fees.She did not keep records of other out-of-pocket costs for transportation.Dena can include $167 in computing her medical expenses.

Accepted Answer

The answer of In 2017, Dena traveled 600 miles for...

Question 16

Adrienne sustained serious facial injuries in a motorcycle accident.To restore her physical appearance, Adrienne had cosmetic surgery.She cannot deduct the cost of this procedure as a medical expense.

Accepted Answer

Cosmetic surgery costs are generally not deductible as a medical expense unless the surgery is necessary to ameliorate a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Since Adrienne's surgery was to restore her appearance due to injuries from an accident, it could be considered a deductible medical expense.

Question 17

In 2017, Brandon, age 72, paid $3,000 for long-term care insurance premiums.He may include the $3,000 in computing his medical expense deduction for the year.

Accepted Answer

Long-term care insurance premiums are treated as medical expenses and can be included in the medical expense deduction if the taxpayer's total medical expenses exceed a certain percentage of their adjusted gross income. As Brandon is over 65 years old, the threshold is lower for him at 7.5% instead of 10%.

Question 18

Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are not deductible if incurred for personal reasons, but they are deductible as deductions for AGI if incurred as a business expense by a self-employed taxpayer.

Accepted Answer

Fees for automobile inspections, automobile titles and registration, bridge and highway tolls, parking meter deposits, and postage are deductible as business expenses for self-employed taxpayers, but not for personal reasons.

Question 19

Mindy paid an appraiser to determine how much a capital improvement made for medical reasons increased the value of her personal residence.The appraisal fee qualifies as a deductible medical expense.

Accepted Answer

The answer of Mindy paid an appraiser to determine how...

Question 20

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence.The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project.Sergio may not deduct $2,000 as a tax, but he may add the $2,000 to the basis of his property.

Accepted Answer

According to IRS guidelines, the cost of a new curbing installed by the city in front of personal residence is considered a capital improvement that adds to the basis of the property. It cannot be deducted as a tax.

Quiz 10: Income, Deductions and Credits