Maryland Life and Health Insurance License Practice Exam

What percentage of adjusted gross income must medical expenses exceed for taxpayers to claim a deduction?

1. 5%

2. 7.5%

3. 10%

4. 15%

The correct answer is: 7.5%

To claim a deduction for medical expenses, taxpayers must have these expenses exceed a certain threshold relative to their adjusted gross income. Specifically, the threshold is set at 7.5%. This means that only the portion of medical expenses that goes beyond 7.5% of a taxpayer's adjusted gross income can be deducted on their tax return. For example, if a taxpayer has an adjusted gross income of $50,000, they would need to incur more than $3,750 in medical expenses to qualify for a deduction. This 7.5% rule is an essential guideline established by the Internal Revenue Service to provide relief for individuals facing significant healthcare costs, while also maintaining a balance to prevent the abuse of tax deductions. The other percentage options provided do not align with the current tax regulation regarding the threshold for deducting medical expenses. Understanding this deduction is crucial for individuals navigating their tax situations, particularly those with high medical costs in relation to their income.