Itemized Deductions-Medical Expenses

Question 1

What is the AGI threshold for deducting medical expenses?

Answer 1

Medical expenses are deductible only to the extent they exceed 7.5% of AGI.

Question 2

Is the 7.5% AGI threshold permanent?

Answer 2

Yes, the 7.5% threshold was extended through 2020 and made permanent by the Consolidated Appropriations Act for 2021

Question 3

Name three types of qualifying medical expenses.

Answer 3

Prescription drugs, health insurance premiums (if not pre-tax), eligible home modifications (e.g., wheelchair ramps)

Question 4

List examples of non-deductible medical expenses.

Answer 4

Elective cosmetic surgery, general health items, health club dues, marijuana (even if legal in some states), over-the-counter drugs, dance lessons

Question 5

Are nursing home costs deductible?

Answer 5

Yes, if the care is medically necessary

Question 6

Are travel and lodging for medical care deductible?

Answer 6

Yes, but lodging is limited to $50 per night

Question 7

How do you calculate deductible expenses when you receive a reimbursement in the same year?

Answer 7

Deductible expenses = Total expenses − reimbursements.

Question 8

What happens if you receive a reimbursement in a later year for expenses previously deducted?

Answer 8

The reimbursement is taxable income in the year received, but only if you took a deduction in the prior year (Tax Benefit Rule)

Question 9

If AGI is $100,000 and medical expenses are $9,000, what is the deductible amount?

Answer 9

$9,000 − (7.5% × $100,000) = $1,500

Question 10

In 2024, you have $15,000 in expenses and $10,000 reimbursed; in 2025, you get an additional $2,000 reimbursement. What is deductible and what is taxable?

Answer 10

2024 deduction: $5,000; 2025 taxable income: $2,000 (if 2024 deduction was claimed)

Question 11

If you spend $8,000 on liposuction and $3,000 on prescribed physical therapy, what is deductible?

Answer 11

Only $3,000 for prescribed physical therapy; cosmetic surgery is not deductible.

Question 12

What rule applies to all itemized deductions regarding reimbursements?

Answer 12

The Tax Benefit Rule

Question 13

What forms are relevant for medical deductions?

Answer 13

Schedule A (Itemized Deductions) and Form 8889 (HSAs)

Question 14

What IRS publication defines eligible travel costs for medical deductions?

Answer 14

IRS Publication 502