Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2019. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2019, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2020. Determine the maximum itemized deduction allowable for medical expenses in 2019. a.$9,200 b.$800 c.$3,800 d.$12,800 e. None of these choices are correct.

$3,800

Explanation:

According to the scenario, computation of the given data are as follow:-

Particular                                                              Amount ($)

Bills of doctor and dentist and hospital expenses9,200

Less-received an insurance reimbursement4,400

Add-prescribed medicines and drugs3,000

Add-high deductible health insurance policy5,000

Total expenses                                  12,800

Less- AGI’s 7.5%   ($120,000 × 7.5% )$9,000

After Deduction medical expenses for 2019$3,800

Contribution of $2,600 to a qualification health savings account is a deduction for AGI. So it is not calculated in deduction.  

According to the analysis, option (C) $3,800 is correct.

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