Income Tax

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Jason Stitt Income Tax Chapter 10 9. A Health Savings Account (HSA) plan requires a high-deductible medical insurance policy, which means that the premiums on the policy will be less than for a low-deductible policy. The contributions to the HSA are deductible for AGI, which reduces the nondeductible amount of itemized deductions subject to certain limitations, and the taxpayer does not have to itemize to obtain the deduction. The HSA distributions pay for the deductible medical expenses and they are not included in gross income. Also, the income earned on the HSA is not included in gross income if it is used to pay medical expenses not covered by the high-deductible plan. 13. There are many nontax issues (financial,…show more content…
Notes (1) Itemized deductions are summarized below: Medical expenses: Medical insurance premiums $ 4,380 Doctor bill for Sam paid in 2011 for services in 2010 7,760 Operation for Sam 7,310 Prescription medicines for Sam 860 Hospital expenses for Sam 2,850 Total medical expenses $23,160 Less: Reimbursement received in 2011 (3,000) Less: 7.5% of $116,795 AGI (8,760) Medical expenses deductible in 2011 $11,400 Taxes: State income taxes ($2,990 + $2,280 + $950) $ 6,220 Property taxes on residence 4,720 10,940 Qualified interest on home mortgage 9,130 Charitable contributions: Church contribution $ 4,800 Tickets to charity dinner dance (Only the excess of the ticket price of $400 over the cost of comparable entertainment of $160 is deductible)

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