[Anonymous]

Why is it that in the first question, the insurance premium is deductible but it is not in the second question?

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In 2013, Wells paid the following expenses:

Premiums on an insurance policy against loss of earnings due to sickness or accident $3,000

Premium on an insurance policy that covers reimbursement for the cost of prescription drugs 500

In 2013, Wells recovered $1,500 of the $2,000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. Disregarding the adjusted gross income percentage threshold, what amount could be claimed on Wells’ 2013 income tax return for medical expenses?

a. $4,000

b. $3,500

c. $1,000

d. $ 500

(c) The requirement is to determine the amount Wells can deduct as qualifying medical expenses without regard to the adjusted gross income percentage threshold. Wells’ deductible medical expenses include the $500 premium on the prescription drug insurance policy and the $500 unreimbursed payment for physical therapy. The earnings protection policy is not considered medical insurance because payments are not based on the amount of medical expenses incurred. As a result, the $3,000 premium is a nondeductible personal expense.

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Jon Stenger, a cash-method taxpayer, age 32, had adjusted gross income of $35,000 in 2013. During the year he incurred and paid the following medical expenses: Drugs and medicines prescribed by doctors $ 300 Health insurance premiums 1,750 Doctors’ fees 2,550 Eyeglasses 75 $4,675 Stenger received $900 in 2013 as reimbursement for a portion of the doctors’ fees. If Stenger were to itemize his deductions, what would be his allowable net medical expense deduction?

a. $0

b. $ 275

c. $1,050

d. $2,475

(b) The requirement is to determine Stenger’s net medical expense deduction for 2013. It would be computed as follows:

Prescription drugs $ 300

Medical insurance premiums 1,750

Doctors ($2,550 – $900) 1,650

Eyeglasses 75

Less 10% of AGI ($35,000) 3,500

Medical expense deduction for 2013 $ 275

[mla1169]

Because the first question instructs you to disregard the AGI % threshold and the second question does not.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

Because the first question instructs you to disregard the AGI % threshold and the second question does not.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[Anonymous]

The policy in the first question is also for loss of wages and is paid directly to the insured and not to the doctor, basically AFLAC. The $1,500 came from a different policy that Wells had through a group plan at work. Wells paid out $2,000 and got back $1,500, so Wells can count the difference, $500, as a medical expense paid along with the premium for prescription coverage. The premium in the second question is self paid health insurance, or BC/BS, so if Wells can itemize, it would go on Sch A.. This is why I seriously hated REG!

[Anonymous]

The policy in the first question is also for loss of wages and is paid directly to the insured and not to the doctor, basically AFLAC. The $1,500 came from a different policy that Wells had through a group plan at work. Wells paid out $2,000 and got back $1,500, so Wells can count the difference, $500, as a medical expense paid along with the premium for prescription coverage. The premium in the second question is self paid health insurance, or BC/BS, so if Wells can itemize, it would go on Sch A.. This is why I seriously hated REG!

[Author]

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