Question 1

In 2019, Brandon, age 72, paid $5,000 for long-term care insurance premiums. He may include the $5,000 in computing his medical expense deduction for the year.

Accepted Answer

Long-term care insurance premiums are considered a qualified medical expense and can be included in computing the medical expense deduction if they exceed 7.5% of the taxpayer's adjusted gross income.

Question 2

On 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 Publication 502, "You can include in medical expenses the cost of operating and maintaining a swimming pool if it is medically necessary. Also, the cost of installing a swimming pool that is medically necessary is considered a medical expense." Therefore, Ed's increase in utility bills due to the operation of the pool would qualify as a medical expense since the pool was installed on the recommendation of a physician for his heart condition.

Question 3

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 appraisal fee itself is not a deductible medical expense, even if the capital improvement is for medical reasons. Only the cost of the improvement that exceeds the increase in property value can be considered a deductible medical expense.

Question 4

Jim's employer pays half of the premiums on a group medical insurance plan covering all employees, and employees pay the other half. Jim can exclude the half of the premium paid by his employer from his gross income and may include the half he pays in determining his medical expense deduction.

Accepted Answer

This statement is true according to IRS rules regarding the tax treatment of employer-sponsored health insurance premiums. Jim can exclude the portion of the premium paid by his employer from his taxable income and can include the portion he pays in calculating his medical expense deduction, subject to certain limitations.

Question 5

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 $2,000 increase in value does not affect the medical expense deduction. Only the $8,000 that qualifies as a medical expense can be deducted.

Question 6

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 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 7

This year 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 $180 in computing her medical expenses.

Accepted Answer

The total amount of deductible medical expenses that Dena can include in her calculations is $250 ($90 for meals + $145 for hotel room + $15 in parking fees). Since this is less than the IRS medical expense deduction threshold for 2020 (7.5% of adjusted gross income), Dena can include the entire amount of $250 in computing her medical expenses, which includes the $180 for specialized medical treatment.

Question 8

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 capital improvement and is not deductible as an ordinary and necessary expense for tax purposes, even if it is required by the city and provides an incidental benefit to the public welfare.

Question 9

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 10

Maria traveled to Rochester, MN with her son who had surgery at the Mayo Clinic. He 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 11

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 payments (employer's share) for household employees are not deductible as itemized deductions on personal income tax returns.

Question 12

Bill paid $2,500 of medical expenses for his daughter, Marie. She 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, taxpayers can include medical expenses paid for their dependent children, even if the child is married and files a joint return with their spouse. Therefore, Bill can include the $2,500 of medical expenses when calculating his medical expense deduction.

Question 13

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, expenses for general neighborhood or community improvements, like the new curbing in Sergio's case, cannot be deducted as a tax but can be added to the basis of the property. This means that the cost will be used to determine the property's gain or loss when it is eventually sold.

Question 14

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

These expenses can be deducted as business expenses for self-employed taxpayers, but not as personal expenses.

Question 15

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

According to IRS rules, a taxpayer may claim medical expenses for a child who would otherwise qualify as a dependent but earns income up to a certain limit. In 2020, the limit is $4,300. Since James earns $7,500, he does not meet the income test for being a dependent. However, Chad may still claim James' medical expenses because he provided more than half of James' support during the year.

Question 16

In 2019, Rhonda received an insurance reimbursement for medical expenses incurred in 2018. She is not required to include the reimbursement in gross income in 2019 if she claimed the standard deduction in 2018.

Accepted Answer

This statement is true. According to IRS Publication 525, if a taxpayer claimed the standard deduction in the year that medical expenses were incurred and later receives a reimbursement for those expenses in a subsequent year, the reimbursement is not included in gross income in the subsequent year.

Question 17

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 a Health Savings Account (HSA) are deductible for AGI, meaning they can be subtracted from your total income to determine your adjusted gross income (AGI). Therefore, the entire $2,000 contribution made by Georgia qualifies as an expense deductible for AGI.

Question 18

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, along with medical expenses if they exceed a certain percentage of the taxpayer's adjusted gross income.

Question 19

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 private school tuition cannot be deducted as a medical expense, even if a physician recommends the school for the child's health or well-being. The IRS does not consider school tuition, even under a physician's recommendation, as a deductible medical expense.

Question 20

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2019. He expects $5,000 of these expenses to be reimbursed by an insurance company in 2020. In determining his medical expense deduction for 2019, Matt must reduce his 2019 medical expenses by the amount of the reimbursement he expects in 2020.

Accepted Answer

In determining his medical expense deduction for 2019, Matt should not reduce his 2019 medical expenses by the expected reimbursement in 2020. He can only deduct the expenses actually paid out-of-pocket in 2019, and adjustments for reimbursements are made in the year they are received.

Quiz 10: Deductions and Losses: Certain Itemized Deductions