Yes. A traditional IRA deduction will decrease adjusted gross income, which is the
base for determining the medical expense deduction (i.e., 7.5% × AGI).
Increase. A lower AGI will result in a smaller nondeductible amount of medical
expenses and a larger medical expense deduction.
pp. 10-2 and 10-3
David, who is self-employed, may deduct 100% of the premium of $7,500 as a deduction
AGI. Joan, who is an employee, may include the premiums of $8,000 she paid in
computing her itemized deduction for medical expenses (subject to the 7.5% floor).
Arturo, a calendar year taxpayer, paid $16,000 in medical expenses in 2007. Even if he
expects $12,000 of these expenses to be reimbursed by an insurance company in 2008,
he can include all $16,000 of the expenses in determining his medical expense
deduction for 2007. He is not required to consider the potential reimbursement in
computing his medical expense deduction for 2007.
Casualty losses must be reduced if there is an expectation of reimbursement. Therefore,
Arturo’s starting point in computing the casualty loss deduction is $6,000 ($20,000 loss –
$14,000 expected reimbursement). Further reductions are required for the $100 floor
and the 10% of AGI floor.
pp. 10-7 and 10-8
Derek and Cynthia can claim a medical expense deduction for the current year of
$2,200, determined as follows:
Physician bills, dentist bills, and hospital expenses
Health insurance premiums
Prescribed medicines and drugs
Total medical expenses
Less: 7.5% of $100,000 (AGI)
Deductible medical expenses