While entering my medical expense deduction the system informed me that I could not deduct the full amount. It was made clear to me that the amount that can be deducted is the total medical expenses minus the 7.5% of my AGI. This is of course as long as the medical expenses are more than that 7.5% which mine are. So the system came up with a deduction amount that was $286.80 less than what I calculated. I can not figure out why. If you can help me understand I would appreciate it. I have a token number of 1269713. Thank you!
The amount of medical expenses that can be deducted is the amount that is greater than 7.5 percent of your AGI. Schedule A calculates that for you.
The first issue I see if that you had distributions from your HSA. Most taxpayers are not aware that TurboTax assumes that you will report ALL medical expenses, including ones reimbursed by insurance and your HSA.
TurboTax, therefore, reduces your Medical Expenses by the amount of the HSA distributions, on the assumption that you listed these expenses for Schedule A.
But since most taxpayers list only unreimbursed expenses, this artificially reduces the total expenses. Look at the Medical WKS for your return (assuming that you have the CD/download version of TurboTax).
You said, "This is of course as long as the medical expenses are more than that 7.5% which mine are" - well, no they're not. Because of this HSA distribution reducing your medical expenses, your net medical expenses are considerably less than 7.5% of your AGI. So your medical expense deduction on Schedule A is zero.
Did you enter ALL of your medical expenses? If not, I advise taxpayers who need to deal with the HSA distribution being subtracted from entered medical expense to make a miscellaneous expense entry of "HSA adjustment" and the dollar amount of the 1099-SA distribution. This way, the total amount of medical expenses will be preserved.
Does this work for you?