Kentucky Health Insurance Practice Exam

Individuals who itemize deductions can claim medical expense deductions exceeding what percent of their adjusted gross income?

1. 5%

2. 7%

3. 10%

4. 15%

The correct answer is: 10%

Individuals who itemize deductions can claim medical expense deductions that exceed 10% of their adjusted gross income (AGI). This means that only the portion of medical expenses that surpasses this threshold can be deducted when calculating taxable income. This limit is significant because it establishes a baseline of personal responsibility for medical costs, ensuring that only larger, potentially catastrophic medical expenses can influence tax liability. For instance, if a person has an AGI of $50,000, they could only deduct medical expenses to the extent that they exceed $5,000 (10% of their AGI). This rule is intended to help streamline the tax code by limiting the impact of routine medical expenses and focusing on those that constitute a substantial financial burden. Historically, this percentage was lower in previous years, but adjustments have been made in various tax legislation, with 10% being the current threshold as of the latest tax guidelines available through 2023.