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.
A)$800
B)$3,800
C)$9,200
D)$12,800
E)None of these

Question

Quizplus · Accepted Answer

The maximum itemized deduction allowable for medical expenses is calculated by first summing up all medical expenses, then subtracting reimbursements received in the same tax year, and finally applying the 7.5% AGI floor. Fred and Lucy's total medical expenses are $9,200 (doctor, dentist, and hospital) + $3,000 (prescribed medicines) + $5,000 (health insurance) + $2,600 (HSA contribution) = $19,800. They received a reimbursement of $4,400 in 2019, so their net medical expenses are $19,800 - $4,400 = $15,400. The AGI floor for 2019 is 7.5% of their AGI, which is 7.5% of $120,000 = $9,000. Therefore, their deductible medical expenses are $15,400 - $9,000 = $6,400. However, the question asks for the maximum itemized deduction allowable, and since they expect to receive an additional reimbursement of $1,000 in January 2020, this future reimbursement does not reduce their 2019 medical expenses. Thus, the correct answer reflects the calculation without considering the future reimbursement, making $6,400 the correct deduction amount. However, since this option is not provided, the correct choice based on the options given is "None of these."

Fred and Lucy Are Married, Ages 33 and 32, and Together