W, who is married and files a joint return, had adjusted gross income last year of $50,000.The following is a list of W's itemized deductions for last year: Unreimbursed medical expenses before limitation $\quad \$ 6,000$
Charitable contributions $\quad$$\quad$$\quad 3,000$
Interest paid on home mortgage $\quad$$\quad 5,000$
State and local property taxes $\quad$$\quad$$\quad$3,500 This year, W received $6,000 as reimbursement from his insurance company for his medical expenses in the prior year.How much of the reimbursement must W include in this year's gross income?

Question

Quizplus · Accepted Answer

W can only include the amount of the reimbursement that provided a tax benefit in the prior year. The medical expense deduction is limited to the amount that exceeds 7.5% of AGI. Last year, 7.5% of $50,000 is $3,750, so only $2,250 ($6,000 - $3,750) was deductible. Therefore, W must include $2,250 in this year's gross income.

W, Who Is Married and Files a Joint Return, Had $6,000\quad \$ 6,000$6,000

W, Who Is Married and Files a Joint Return, Had $\quad \$ 6,000$