Tax-Wise Ways to Handle Medical Costs (00320867)

For many taxpayers, the bulk of their medical costs are covered by private insurance or Medicare; low-income individuals have coverage through Medicaid. Some taxpayers also have certain medical plans that pay for many things that insurance does not. However, all taxpayers have some costs that are not paid by insurance, a medical plan, or a government program. These out-of-pocket costs may be deductible. This course focuses on handling medical costs from a tax perspective in 2013.
Final Exam > Results Page

final exam score:

final exam status:

90%

Question 1

Correct

In 2013, Mr. and Mrs. Alverez are both age 68 and itemized their deductions. What is the AGI threshold for deducting their medical expenses for regular income tax purposes?

2%

(You Answered) (Correct Answer) 7.5%

10%

No threshold

Question 2

Correct

Which of the following medical expenses is not deductible?

(You Answered) (Correct Answer) Cosmetic surgery for nonmedical reasons

Breast pumps and lactation equipment

Sex reassignment surgery for a person with gender identification disorder

Nicotine patches prescribed by a doctor

Question 3

Correct

For an individual to be considered in need of long-term care services so that fees are deductible, which of the following are taken into account? (The taxpayer must have at least two of them.)

Needing help with transferring

Needing help with bathing

Incontinence

(You Answered) (Correct Answer) All of the above

Question 4

Correct

A taxpayer fails to keep records to substantiate out-of-pocket medical expenses. What are the results?

The taxpayer can deduct an approximate amount.

The taxpayer can rely on a fixed dollar amount set by the IRS.

(You Answered) (Correct Answer) The taxpayer cannot claim any deduction.

The taxpayer can deduct a percentage based on AGI.

Question 5

Correct

Which of the following types of health insurance are deductible?

Medicare Part B premiums

COBRA

Employee after-tax contributions toward employer-provided health plans

(You Answered) (Correct Answer) All of the above

Question 6

Correct

In 2013, a taxpayer who is 55 years old pays $2,500 for long-term care insurance. What is the maximum amount he can deduct?

0

$1,310

(You Answered) (Correct Answer) $1,360

$2,500

Question 7

Correct

Who may be eligible for the tax credit for health insurance costs under Code Sec. 35?

A Trade Adjustment Assistance (TAA) recipient

An alternative TAA recipient

A PBGC pension recipient who is at least age 55

(You Answered) (Correct Answer) Any of the above

Question 8

Correct

Which statement about medical FSAs in 2013 is correct?

(You Answered) (Correct Answer) If both spouses work for the same employer, each can contribute up to the maximum amount.

The employer sets the maximum contribution limit.

Employer contributions reduce the amount that an employee can contribute as a salary reduction amount.

The same limit for medical FSAs applies to dependent care FSAs.

Question 9

Incorrect

Which statement about HSAs is not correct?

Contributions can only be made if a taxpayer has coverage under an HDHP.

(You Answered) The penalty rate for nonqualified withdrawals is 20%.

(Correct Answer) Withdrawals after age 65 are tax free.

The deduction for contributions is taken from gross income.

Question 10

Correct

Which of the following statements is correct?

(You Answered) (Correct Answer) Income from participation in medical research is taxable.

Medicare premiums are not deductible.

The special premiums based on MAGI can never be reduced.

Both the basic and special premiums for Part D (drug) coverage are paid to the provider.