Richard, age 50, is employed as an actuary. For calendar year 2019, he had AGI of $130,000 and paid the following medical expenses: Medical insurance premiums $5,300 $\begin{array}{lr}
\text { Doctor and dentist bills for Derrick and Jane (Richard's parents) } & 7,900 \
\text { Doctor and dentist bills for Richard } & 5,100 \
\text { Prescribed medicines for Richard } & 830 \
\text { Nonprescribed insulin for Richard } & 960
\end{array}$ Derrick and Jane would qualify as Richard's dependents except that they file a joint return. Richard's medical insurance policy does not cover them. Richard filed a claim for $4,800 of his own expenses with his insurance company in November 2019 and received the reimbursement in January 2020. What is Richard's maximum allowable medical expense deduction for 2019?
A) $0
B) $7,090
C) $10,340
D) $20,090
E) None of these

Question

Quizplus · Accepted Answer

Richard's maximum allowable medical expense deduction for 2019 is calculated by first adding all his deductible medical expenses, then subtracting the reimbursement he received in January 2020 (since it pertains to the 2019 tax year), and finally applying the 7.5% AGI floor applicable for the tax year 2019. The deductible medical expenses include his own medical insurance premiums, doctor and dentist bills, prescribed medicines, and nonprescribed insulin, totaling $12,190. The expenses for Derrick and Jane are not deductible because they are not his dependents for tax purposes. After subtracting the $4,800 reimbursement, the total is $7,390. Applying the 7.5% AGI floor ($130,000 * 7.5% = $9,750), Richard's expenses do not exceed this floor, making his maximum allowable deduction $0. However, the correct calculation considering the AGI floor should actually consider the expenses before the floor is applied, which seems to have been an oversight in the explanation process. The correct approach would involve deducting the AGI floor from the total eligible medical expenses ($12,190 - $4,800 reimbursement), and then comparing this net expense against the AGI floor to determine the deductible amount. This oversight in the explanation indicates a mistake in the calculation process, leading to an incorrect conclusion in the explanation provided.

Richard, Age 50, Is Employed as an Actuary Derrick and Jane Would Qualify as Richard's Dependents Except That