Larry and Beth are married and together have AGI of $80,000 in 2010.They have two dependents and file a joint return.They pay $3,000 for a high deductible health insurance policy and they contribute $2,400 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $7,500 in physician and dentist bills and hospital expenses,and $1,700 for prescribed medicine and drugs.In November 2010,they received an insurance reimbursement of $2,100 for hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2011.Determine the maximum deduction allowable for medical expenses in 2010.
A)$4,100.
B)$6,100.
C)$7,100.
D)$10,100.
E)None of the above.

Question

Quizplus · Accepted Answer

The deductible medical expenses are calculated as total medical expenses minus insurance reimbursements, minus 7.5% of AGI. Total expenses are $7,500 + $1,700 = $9,200. Reimbursements are $2,100. AGI is $80,000, so 7.5% of AGI is $6,000. Deductible expenses are $9,200 - $2,100 - $6,000 = $1,100. The Health Savings Account contribution is not deductible as a medical expense. Therefore, the maximum deduction is $4,100.

Larry and Beth Are Married and Together Have AGI of $80,000