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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- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

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- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.

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