Richard, age 50, is employed as an actuary. For calendar year 2018, he had AGI of $130,000 and paid the following medical expenses:
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 2018 and received the reimbursement in January 2019. What is Richard's maximum allowable medical expense deduction for 2018?
A) $0
B) $7,090
C) $10,340
D) $20,090
E) None of the above

Question

Richard, age 50, is employed as an actuary. For calendar year 2018, he had AGI of $130,000 and paid the following medical expenses: 
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 2018 and received the reimbursement in January 2019. What is Richard's maximum allowable medical expense deduction for 2018?
A) $0 
B) $7,090 
C) $10,340 
D) $20,090 
E) None of the above

Quizplus · Accepted Answer

To determine the maximum allowable medical expense deduction for 2018, we need to calculate Richard's adjusted gross income (AGI) and then subtract the applicable percentage of his AGI. The applicable percentage for 2018 is 7.5% because Richard is over age 65.

AGI: $130,000 
Medical expenses: $19,530 (add up all expenses)
Less: 7.5% of AGI: $9,750 
Total allowable deduction: $9,780 (medical expenses not covered by insurance minus the AGI percentage)

However, Richard's reimbursement from his insurance company needs to be taken into account. Since he received the reimbursement in January 2019, we cannot deduct it from his 2018 medical expenses. Therefore, Richard's maximum allowable medical expense deduction for 2018 is $10,340 (total allowable deduction minus reimbursement received in 2019).

Richard, Age 50, Is Employed as an Actuary