Maria and Don had 20,800 in medical expenses. Their family...

Maria and Don had $\$ 20,800$ in medical expenses. Their family medical insurance covered 60$\%$ of these expenses. The IRS allows medical and dental expense deductions for the amount that exceeds 7.5$\%$ of a taxpayer's adjusted gross income. If their adjusted gross income is $\$ 101,598$ , how much can they claim as a medical deduction?

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Key Concepts

Adjusted Gross Income (AGI)

Adjusted Gross Income refers to an individual’s total gross income minus specific deductions, serving as the basis for calculating various tax liabilities and thresholds. It is a critical figure in determining eligibility and limitations for various tax deductions and credits, including medical expenses.

Medical Expense Deductions

Medical expense deductions allow taxpayers to deduct qualified unreimbursed medical and dental expenses from their taxable income when these expenses exceed a specified percentage of their AGI. This deduction helps taxpayers reduce their overall tax burden by acknowledging significant out-of-pocket healthcare costs.

Deduction Threshold

The deduction threshold is the minimum percentage of AGI that must be exceeded by medical expenses before they become deductible. This threshold is designed to limit tax benefits to taxpayers with substantially high medical costs relative to their income, ensuring that only significant burdens are tax-deductible.

Net Unreimbursed Medical Expenses

When calculating deductible medical expenses, any reimbursements from insurance or other sources must be subtracted from the total expenses to obtain the net unreimbursed amount. Only this net amount, if it exceeds the applicable AGI threshold, is eligible for deduction on the tax return.

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