Chapter 5 Homework

# Taxpayers may deduct the cost of lodging up to 50 per

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Taxpayers may deduct the cost of lodging up to \$50 per night, per person, on a trip primarily for and essential to medical care provided by a physician or a licensed hospital. If the taxpayer does not wish to deduct actual costs of transportation by personal automobile, the standard mileage rate is 23 cents per mile for 2015. The Murphy's itemized medical and dental expenses are determined below: Medical insurance premiums \$1,150.00 Medical care lodging 65.00 Hospital bills 2,200.00 Doctor bills 850.00 Dentist bills 175.00 Prescription drugs and medicines 340.00 Psychiatric care 310.00 Transportation 18.00* Less: insurance reimbursements (900.00) Subtotal, rounded to the nearest whole dollar \$4,208 Line 1 Less: 7.5% AGI (\$26,500 x 7.5%) (1,988) Line 3 Excess expenses qualifying for the medical deduction \$2,220 Line 4 *78 miles x .23 = \$17.94, rounded to \$18.00.

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Caution. Do not include expenses reimbursed or paid by others. Medical and Dental Expense s 1 Medical and dental expenses (see instructions) . . . . . . . . . . . . . . 1 4,208 (a) 2 Enter amount from Form 1040, line 38. . 2 26,500 3 Multiply line 2 by 10% (.10). But if either you or your spouse was born before January 2, 1951, multiply line 2 by 7.5% (.075) instead 3 1,988 4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2,220 (a) \$1,150 + \$65 + \$2,200 + \$850 + \$175 + \$340 + \$310 + (78 x \$0.23) – \$900 Problem 5-2 Medical Expenses (LO 5.1) In 2015, Margaret and John Murphy (age 66 and 68, respectively) are married taxpayers who file a joint tax return with AGl of \$26,500. During the year they incurred the following expenses: Medical insurance premiums \$1,150 Premiums on an insurance policy that pays \$100 per day for each day Margaret is hospitalized 300 Medical care lodging (two people, one night) 65 Hospital bills 2,200 Doctor bills 850 Dentist bills 175 Prescription drugs and medicines 340 Psychiatric care 310 In addition, they drove 78 miles for medical transportation, and their insurance company reimbursed them \$900 for the above expenses. On the following segment of Schedule A of Form 1040, calculate the Murphy's medical expense deduction. Note: If required, round any amount to the nearest dollar. Caution. Do not include expenses reimbursed or paid by others. Medical and Dental Expense s 1 Medical and dental expenses (see instructions) . . . . . . . . . . . . . . 1 4208 2 Enter amount from Form 1040, line 38. . . . . 2 26500 3 Multiply line 2 by 10% (.10). But if either you or your spouse was
born before January 2, 1951, multiply line 2 by 7.5% (.075) instead 3 1988 4 Subtract line 3 from line 1. If line 3 is more than line 1, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2220

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Problem 5-6 Taxes (LO 5.2) Laura is a single taxpayer living in New Jersey with adjusted gross income for the 2015 tax year of \$35,550. Laura's employer withheld \$3,300 in state income tax from her salary. In April of 2015, she pays \$650 in additional state taxes for her prior year's tax return. The real estate taxes on her home are \$1,750 for 2015, and her personal property taxes, based on the value of the property, amount to \$380. Also, she paid \$75 for state gasoline taxes for the year. Complete the taxes section of Schedule A below to report Laura's deduction assuming she elects to deduct state and local income taxes.
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