Question 1

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

False

Question 2

Any personal expenditures not specifically allowed as itemized deductions by the tax law are nondeductible (unless they are deductible in arriving at AGI).

Accepted Answer

Personal expenditures that are not mentioned in the list of itemized deductions in the tax law are generally nondeductible. However, there are some expenses that can be deducted in arriving at AGI, such as certain business expenses, alimony, and student loan interest.

Question 3

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

The statement is true. These expenses are not deductible if incurred for personal reasons, but they can be deducted as a business expense by a self-employed taxpayer.

Question 4

In 2012, 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 can be included in the medical expense deduction calculation for individuals who are 65 or older, subject to certain limits based on age. As Brandon is 72 years old in this scenario, he may include the $3,000 he paid for long-term care insurance premiums in his medical expense deduction calculation for the year.

Question 5

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 the IRS, if a parent pays medical expenses for a child who is married and files a joint return with their spouse, the parent can still include the expenses when calculating their own medical expense deduction. Therefore, Bill can include the $2,500 of expenses when calculating his medical expense deduction.

Question 6

Maria traveled to Rochester, Minnesota, with her son, who was operated on 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 answer of Maria traveled to Rochester, Minnesota, with her...

Question 7

Gerald, a physically handicapped individual, pays $9,000 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 $7,000 of the expenditure qualifies as a medical deduction (subject to the 7.5% floor).

Accepted Answer

The cost of home improvements that increase the value of the property are not deductible as medical expenses. Therefore, only the $7,000 that qualifies as necessary medical expenses (such as the wheelchair ramps) can be deducted subject to the 7.5% floor.

Question 8

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 not claim James' medical expenses because he is not a dependent.

Accepted Answer

Even if James earns income, he may still be claimed as a dependent if he meets the other requirements, such as being under a certain age and receiving financial support from Chad. Therefore, Chad may still potentially claim James' medical expenses as a deduction on his tax return.

Question 9

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

Accepted Answer

FICA paid on wages paid to a domestic employee for personal household purposes is not deductible as an itemized deduction.

Question 10

George, a sculptor, has an elevator installed in his house to transport heavy materials to his loft studio because he is concerned that he might strain his back by lifting heavy objects. George may deduct the full cost of the elevator as a medical expense.

Accepted Answer

The cost of the elevator may be deductible as a home modification expense for medical reasons, but it cannot be deducted as a medical expense. Medical expenses are usually limited to expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease or illness.

Question 11

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

Question 12

Margaret, who is self-employed, paid $6,000 for medical insurance coverage.She can include the $6,000 when calculating her medical expense deduction.

Accepted Answer

Self-employed individuals can deduct health insurance premiums as an adjustment to income, not as a medical expense deduction.

Question 13

A medical expense does not have to relate to a particular ailment to be deductible.

Accepted Answer

Medical expenses can include preventive care, routine check-ups, and other expenses related to maintaining general health, not just expenses related to a specific illness or condition.

Question 14

In 2013, Rhonda received an insurance reimbursement for medical expenses incurred in 2012.She is not required to include the reimbursement in gross income in 2013 if she claimed the standard deduction in 2012.

Accepted Answer

This statement is true. If Rhonda claimed the standard deduction in 2012, she is not required to include the insurance reimbursement in her gross income for 2013. However, if she itemized deductions in 2012, she may need to include the reimbursement in her gross income.

Question 15

In 2012, Dena traveled 545 miles for specialized medical treatment that was not available in her hometown. She paid $80 for meals during the trip, $125 for a hotel room on Tuesday night, and $15 in parking fees. She did not keep records of other out-of-pocket costs for transportation. Dena can include $270 in computing her medical expenses.

Accepted Answer

Dena can only include the actual costs she incurred for medical purposes. Without records of transportation costs, she cannot include an estimated amount like $270. Only documented expenses like meals, hotel, and parking can be considered.

Question 16

Taxes assessed for local benefits, such as a new sidewalk, are not deductible as real property taxes.

Accepted Answer

Taxes assessed for local benefits, such as a new sidewalk, are considered assessments and are not deductible as real property taxes on federal income tax returns.

Question 17

Matt, a calendar year taxpayer, pays $11,000 in medical expenses in 2012.He expects $5,000 of these expenses to be reimbursed by an insurance company in 2013.In determining his medical expense deduction for 2012, Matt must reduce his 2012 medical expenses by the amount of the reimbursement he expects in 2013.

Accepted Answer

For tax purposes, medical expenses are deductible in the year they are paid, regardless of expected future reimbursements. Matt should not reduce his 2012 deduction by the expected 2013 reimbursement.

Question 18

Georgia contributed $2,000 to a qualifying Health Savings Account in 2012.The entire amount qualifies as a medical expense and is potentially deductible as an itemized deduction.

Accepted Answer

Contributing to a Health Savings Account is not a deductible medical expense, but rather a pre-tax contribution. Only qualifying medical expenses paid out of the HSA account are potentially deductible as itemized deductions.

Question 19

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

This is because the cost of new curbing installed by the city is considered a capital improvement to Sergio's property, and can be added to the basis of the property for tax purposes. However, it is not deductible as a tax expense.

Question 20

Erica, Carol's daughter, has a mild form of autism. Dr.Malone recommends that Carol send Erica to a special school for autistic children when she enters first grade. Erica may include the cost of tuition, meals, and lodging for the special school when computing her medical expense deduction.

Accepted Answer

According to IRS Publication 502, "Medical expenses include amounts paid for special schools and separately stated tuition fees for special education to help a child overcome learning disabilities." Therefore, Erica's cost of tuition, meals, and lodging for the special school for autistic children may be included in Carol's medical expense deduction.

Quiz 10: Deductions and Losses: Certain Itemized Deductions