Paul and Patty Black (both are age 66) are married and together have AGI of $140,000 in 2013. They have two dependents and file a joint return. During the year, they paid $8,000 for medical insurance, $15,000 in doctor bills and hospital expenses, and $1,000 for prescribed medicine and drugs.
a. In December 2013, the Blacks received an insurance reimbursement of $3,500 for hospitalization expenses. Determine the deduction allowable for medical expenses paid during the year.
b. Assume instead that the Blacks received the $3,500 insurance reimbursement in February 2014. Determine the deduction allowable for medical expenses incurred in 2013.
c. Assume that the Blacks received the $3,500 insurance reimbursement in February 2014. Discuss whether the reimbursement will be included in their gross income for 2014. General discussion. All of the following expenses are deductible, subject to the 7.5% floor: $8,000 for medical insurance, $15,000 in doctor bills and hospital expenses, and $1,000 for prescribed medicine and drugs.