Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
14 Cards in this Set
- Front
- Back
|
With regard to the tax treatment of medical expenses, which of the following statements is CORRECT? * A) Personal medical and dental expenses reimbursed by insurance are not deductible.* B) Medical expenses, reimbursed or unreimbursed, are always deductible from an insured's income for taxation purposes. * C) Benefits received under an individual accident and health plan are taxable income to the recipient. * D) Unreimbursed medical and dental expenses are deductible by an individual taxpayer to the extent they exceed 15% of his or her adjusted gross income. |
a Medical expenses that are reimbursed by insurance are not tax deductible. Unreimbursed medical and dental expenses are deductible to the extent they exceed 10% of an individual's adjusted gross income. Benefits received under an individual accident and health plan are not considered taxable income to the recipient. |
|
|
Accurate Data Inc. pays $5,000 a year in premiums for a disability insurance policy covering its senior vice president, David Mills. If David later becomes disabled and receives the monthly benefits under the policy: * A) Accurate Data must pay the income and FICA tax on the benefits received.* B) David must pay income and FICA tax on the benefits received. * C) Accurate Data cannot take a tax deduction for the premiums paid. * D) David will not have to pay income and FICA tax on the benefits received. |
b If Accurate Data Inc. purchases a disability income policy on David Mills, who receives the monthly benefits upon becoming disabled, David must pay income and FICA tax on the benefits received (note that it is David who is receiving the benefits, not Accurate Data Inc.). However, Accurate Data can take a deduction for the premiums paid. |
|
|
Becky has the following unreimbursed medical expenses: $2,000 in premiums for group accidental death and dismemberment (AD&D) coverage, $500 in dental expenses, and $4,000 for other medical expenses and prescription drugs. If her adjusted gross income last year was $40,000, how much of the medical expenses can she take an income tax deduction for, if any? * A) $1,500.00* B) $3,500.00 * C) $6,500.00 * D) $500.00 |
d When determining the amount of tax deduction that can be taken for unreimbursed medical expenses, premiums paid for group AD&D coverage are not considered qualifying medical expenses. The deduction is limited to the amount exceeding 10% of Becky's adjusted gross income, which would be any amount over $4000 (10% of $40,000). Becky could therefore deduct $500 ($4,500 - $4000) |
|
|
Social Security benefits are financed by a special tax paid by: * A) employees, employers, and those who are self-employed.* B) businesses on the basis of the amount of their assets. * C) employers as a percentage of their profits. * D) state and local governments. |
A |
|
|
Paul is self-employed and pays $5,000 a year in premiums for health insurance covering his family. If his wife also works and is covered by an employer-sponsored health plan, what is the maximum income tax deduction that Paul can take for his health insurance coverage? * A) $2,500.00* B) $3,000.00 * C) $0.00 * D) $5,000.00 |
C Partners and sole proprietors can deduct 100% of amounts paid during the taxable year for insurance that provides medical care for them, their spouses, and dependents. However, the deduction is not available to a partner or sole proprietor if he is eligible to participate in a health plan maintained by an employer of the self-employed individual or his spouse. As a result, Paul will not be able to take an income tax deduction for the amount of premiums paid. |
|
|
Suzanne incurred $10,000 in medical expenses this year that were not covered by her personal medical expense plan. If her adjusted gross income is $50,000, how much of the medical expenses can she deduct from her income taxes, if any? * A) $0.00* B) $1,000.00 * C) $5,000.00 * D) $2,500.00 |
C Suzanne can take a deduction for medical expenses that exceed 10% of her adjusted gross income. She earned $50,000 this year so she can take a deduction for any expense exceeding $5,000. (10% of $50,000). Therefore, she can deduct $5,000. |
|
|
If a business entity purchases disability insurance on the lives of the business owners to fund a disability buy-out: * A) the business can take a full deduction for the premiums paid.* B) the business owners can take a deduction for the premiums paid. * C) the business cannot take a deduction for the premiums paid. * D) the business can take a partial deduction for the premiums paid. |
C If a business entity is the purchaser, policyowner, beneficiary, and premium payor of disability insurance covering the lives of its business owners, the premiums are nondeductible. However, the proceeds are exempt from regularly calculated income tax. |
|
|
Rick, who has no health insurance, incurred $3,000 in medical expenses this year. Assuming his adjusted gross income was $29,000, how much of those medical expenses can he deduct from his income taxes, if any? * A) $2,175.00* B) $3,000.00 * C) $0.00 * D) $100.00 |
D Incurred medical expenses that are not reimbursed by insurance may only be deducted to the extent they exceed 10% of the insured's adjusted gross income. An individual who has an adjusted gross income of $29,000 would be able to deduct only the amount of unreimbursed medical expenses over $2900. Rick would be able to deduct $100. This figure is computed as follows: $29,000 x .10 = $2,900; $3,000 - $2,900 = $100. |
|
|
None of the following can be considered qualifying expenses for purposes of determining an individual's medical tax deduction EXCEPT: * A) premium contributions paid by an employer to a group medical expense plan.* B) premium contributions paid by an individual to a group medical expense plan. * C) premium contributions paid by an individual to a group disability plan. * D) premium contributions paid by an employer to a group disability plan. |
B Individual premium contributions to a group medical expense plan are deductible only when they and other unreimbursed medical expenses exceed 10% of an individual's adjusted gross income. Premium contributions made by an employer and those made by an employee for group disability coverage cannot be considered for purposes of determining a medical tax deduction. |
|
|
Which of the following statements regarding the tax treatment of disability income insurance premiums is CORRECT? * A) Premiums paid by an employer for a group disability plan are considered a taxable benefit to the employee.* B) Premiums paid by an employer for a group disability plan are deductible by the employer. * C) Premiums paid for personal disability income insurance are deductible by the individual. * D) Premiums paid by an employer are deductible by both the employer or the individual. |
B Premiums paid by an employer for a group disability or sick-pay plan are deductible by the employer as a reasonable business expense. Premiums paid by an individual for a personal disability plan are not tax deductible; however, premiums paid on an individual's behalf by an employer under a group plan are not considered a taxable benefit. |
|
|
Brian is the sole proprietor of a book store and paid $5,000 last year in premiums for medical expense coverage. He incurred $6,000 in medical expenses and was reimbursed for these costs under his health plan. Which of the following statements is CORRECT? * A) Brian must include the benefits received from his health plan in income.* B) Brian can take a partial deduction for the amount of premiums paid. * C) Brian can take a deduction for the entire amount of premiums paid. * D) Brian must include part of the benefits received from his health plan in income. |
C Self-employed individuals can take an income tax deduction for all amounts paid for medical care, including insurance premiums. As a result, Brian will be able to deduct the entire amount paid for premiums ($5,000). The benefits received under the plan are not included in income. |
|
|
Sarah pays $250 each month in premiums for her personal dental insurance policy and earns $300,000 a year as CEO of a small company. If she incurs $500 in dental expenses and the insurer reimburses her for these costs, Sarah: * A) can take an income tax deduction for the amount of premiums paid for dental insurance and for the $500 in expenses.* B) can take an income tax deduction for the $500 in dental expenses. * C) can take an income tax deduction for the amount of premiums paid for the dental insurance. * D) cannot take an income tax deduction for either the premiums paid or the $500 in dental expenses. |
D Premiums that Sarah pays on a personal dental insurance policy are not deductible unless they exceed 10% of her adjusted gross income. The same rule applies to unreimbursed medical expenses. Because Sarah was reimbursed for the full amount of her dental costs, she cannot take an income tax deduction. In addition, because the amount of premiums does not exceed 10% of her adjusted gross income, she cannot deduct the premium costs. |
|
|
If an insured under a group health insurance plan claimed a $1,000 income tax deduction for medical expenses but then was reimbursed for the same expenses the following year, the insured: * A) is not required to include the $1,000 in income.* B) must include the $1,000 in income if it exceeds 7.5% of adjusted gross income. * C) must include the $1,000 in gross income. * D) must pay back the money. |
C Benefits that an insured receives under a medical expense policy are not included in gross income because they are paid to offset losses incurred. However, medical expense insurance benefits must be included in gross income to the extent that reimbursement is received for medical expenses deducted in an earlier year. |
|
|
If a company buys disability buy-sell insurance: * A) the premiums are not deductible by the business.* B) the businessowners must pay tax on the benefits received. * C) the business must pay tax on the benefits received. * D) the premiums are deductible by the businessowners. |
A A business cannot deduct premium paid for disability buy-sell insurance, but the benefits received are not taxed. |
