Why hello wow, that's so much easier to be loud.  I'm Carl. I'm a contributor to the optimism collective and we're at OP labs and today we're gonna talk about the OP stack it is OP and The Superchain which you will hear once and you will never forget because it is a sticky means sticky mean now Well, my slides have arrived just in time like uber eats Okay Okay, this is gonna be a fun talk. Let me tell you let me tell you so as Usual I have a bajillion bajillion slides. So in 2018 we set out I use we very liberally we set out to build plasma group plasma group was a nonprofit Focused on scaling Ethereum with layer-2 technology. We wanted to unlock tons of applications Vagillions of transactions per second and so, you know, we sailed out on Ethereum cyberspace Following Vitalik's doctrine following his advice. We knew what to build and so we went and in fact We did some cool stuff last DevCon. We talked we introduced optimistic roll-up and we introduced the Unipig which was like the first implementation and it was pretty sweet if you don't ask you do ask me so Ethereum we did good things good things for Ethereum public goods This was open-source software. It already got forked immediately, but guess what happened We could not get funding for it because we're a nonprofit and Ethereum did not have the public goods funding infrastructure that we needed to Support the building that we were doing to for the public good. No bueno. No bueno at all anyway, so we formed optimism and We set out to not only scale Ethereum, but also fund public goods fund Ethereum public goods Optimism public goods build the community push the community forward And so that we did not realize it. We thought it was gonna be like 12 people at the you know doing optimism. That was an absolute rabbit hole and so This is a story all about how the OP stack was formed and now I'm going to tell you about how the OP stack became the super chain and That powered the optimism collective The social technology which I hope we can use to fund public goods to align people To really make a serious difference and dent in the way that we live our lives in the future Millions of people, you know and really billions in my humble opinion Maybe maybe you know trillions if we go multi-planetary billions of AI really more than that trillions of transactions actually way more than trillions as for sure all of these things Promoting humans over capital and impact making impact profitable, right? We need to be expressing what we want as impact and make that profitable. That's public goods funding really at the end of the day So optimism collective, that's why we're here, but that is not the story. Let's go Lior Jenkins The rough start so this is the whole journey a whole journey rough start, right?  We had built a roll-up We had built a fault-proof, but it was complicated. It was hard to maintain It was difficult to onboard new people. This was not the you know easy sailing that we thought we were gonna do We're like, yes, we know how to build it. Now. Let's put it into production. Wow. This is really hard Really hard and so by the grace of ethers Phoenix the god of rationalist retroactivity We happen to be eating dinner and we saw in the back corner of our eye George Hots Literally the you know founder of comma AI builder of really really good open source production software And we're like George.  And he looked at our code and I'm not gonna lie He gave us some you know a hard pill to swallow He said one he said you have a hundred times the lines of code that you actually need for this To every line of code should be worth at least a hundred dollars That means the cost of maintaining it the cost of people learning it It is expensive to write lines of code even a comment and Finally the goal your goal should be to upstream to Ethereum and build software That is so simple that it can be standardized and built on top of that's your goal And so to kind of prove his point he was like, okay Let me take this compiler that you have that was thousands of lines of code and let me rewrite it and do it right and Turn it into 300 lines of code That was the beginning of the formation of our North Star towards simplicity and standardization And so of course as Geohod does he left And then chapter two we finally had our North Star and so we could start measuring progress towards it We were going to boil our code down to its essence We were going to reduce our geth diff to less than 1,000 lines of code That was our basically our whole road map at the time And so we went to coding our little gerbil selves, you know all these are gerbils Well, they're really hamsters because hamsters actually are cuter than gerbils anyway I'm sorry gerbils. Okay. We started making improvements to our L2 island, right? We terraformed the land further it really we'd like started making real progress simplifying our code It was easier and we became fat gerbils off of our great successes And so we had made some serious progress and in 2021 Q4 we released our EVM equivalents upgrade and that thing has served us well We have been EVM equivalent for basically a year now and Fast as Ethereum and it has been nice. It was a beefy release. It was fantastic, but Our job was not over. We still hadn't finished because Geohot came back He just popped in and he said all right. Let me tell you something else Well done. You got rid of a lot of your code that must have hurt that is hard But your proof system is way too complicated still you're going you're going off the deep end here I can help and so what he did well He contributed cannon just this really simple proof system and why did it? Why was it so simple? Well, it was because it separated the client software From the proof Software from the proof layer you compile the client down to the proof and in fact Vitalik at the same time was suggesting the same kind of architecture But George actually took that and created a you know pretty pretty solid version that people have been playing with ever since and That showed us something else that we hadn't thought about before that showed us the power of Modularity the fact that he was able to achieve this EVM equivalents was because he split it out into two different components And so right EVM equivalent fall proof less than 4,000 lines of code The client compiles to the proof and it showed us that power now. We had a north star but For our goal of reducing our get-diff down to less than a thousand lines now we had a path to achieving it and So we also at the same time happened to be listening to some nice like Freeman episodes And this is one of my favorite moments in in like every podcast that I've listened to basically It's just this line is when things are beautifully done. Usually there's a well thought-out set of abstraction layers It has the thinking about the problem space slicing it up and then going at it that Mentality it changes the game for software development and architecture so you know he's off again and Next up the last mile right we had just made this 10x line of code reduction We but we still had 5x too many lines of code again It was crazy and we still had 10x too many overall. So what did we do? Well? Turns out that we started coding and we noticed that if to was coming to the same Realizations that we were having as well They realize that they needed to modularize the e2 clients and make them talk to each other via the engine API They realized that the currently it was too tightly coupled to monolithic and so what did they do? They took the client software and they split it further into Consensus and execution. That's why we have these consensus clients and execution clients so Well, we saw this e2 consensus. We're like, huh We could just write a roll-up consensus client and boom Slotted in in the same way and now we can reuse all of these other execution clients like get like Aragon Like etc. There's so many and this gives us that multi-client ecosystem that is absolutely critical for securing a chain Which has billions of dollars we need we cannot stop With one client unless you're gonna formally prove your client and good luck And anyway formal proofs are like two clients anyway. Okay point being we finally had our golden ticket to a less than 1,000 line of code diff in geth and so we got to build in in 2022 do do chair foreman building cool things and boom in Our bedrock release our upcoming bedrock release.  We include all rodents in this talk The bedrock release finally we had Created this code in a simple modular way. We split up consensus execution and the proofs And we renamed the proofs to settlement because it's more me me and boom We had achieved that goal of simplicity and standards But then Something unexpected started happening I really didn't I did this from memory I have not refreshed the actual sound I just know the Sound anyway, ratatata. Okay. No, we started getting forked literally all over the place. It is absolutely mind-boggling, right? we Multiple people set out took our code base forked it set up their own settlements and further it got crazier some were modifying EVM we're modifying the EVM and the execution layer in geth and some we're modifying the Actual roll-up part of it to make it a plasma so that you don't post the data front like all of these forks And I'm not talking about like, you know pet project forks. I'm talking about like mega You know you look at L2B. You got the little op's shout out. We got some forks in the room So We had set out we had created the consensus layer execution layer split and then things got crazier Guess what next guess what next well if you were at a talk like five hours ago You would know what next someone literally took the code base for like forked it and made a 3d survival game that is fully on chain literally playing something that is unrecognizable brand new software and and Literally every single block like like I just got a momentarily like we're not talking about like, oh, yeah You know you get an asset and now you have a nft or something No, I'm talking about like you mine a block and that's a transaction or you put something in your inventory That's a transaction. That is crazy sauce, right stuff. We had never thought was possible and they're modifying it right like we modified the the roll-up to become a plasma for extra scalability and Modifying the execution layer and wrapping it with mud shout out to mud making it super fast, right and We get to reuse the whole settlement layer code base for that process and next someone took cannon Literally made it a game boy like made it prove a game boy emulator so that they can then literally play Pokemon and fault prove It literally having up for you know Pokemon roll-up. It doesn't make sense It's like ridiculous what you can really do with this code the sky really is the limit, right? You have the rust program they turned cannon into rust all of these things because we were building open source We were building foundational modules that stand alone and are elegantly built so Very we got all these new forks all these new little islands out in ethereum l2 and Then our north star of simplicity started bearing fruit Great exciting so and Thus this begins a new era It creates it was time for branding because our code base had no name. It was just the code base You know, it's like that's kind of boring. So we're like, hey, let's turn this let's flip it. Let's make it cool Let's make it fun. Let's call it the OP stack now Everyone is using the OP stack. They're contributing to the OP stack to give it back to the stack. We're all building on the stack and so Build the stack build open source public goods push the ecosystem forward So the OP stack, what is it? It's our open source after a stack designed to power blockchain ecosystems built for the optimism collect so That includes that includes of course what we've been talking about this whole time the whole chain software, right? The decentralized stack required for spinning up chains the consensus layer execution layer more layers to come literally This is just the beginning Additionally, it also requires a governance layer things that we're building such as the identity layer the Retroactive public goods funding all of these things need to be built in a modular way so that they can be reused and All on top of Ethereum, of course, where are we right now? Come on. What's on my shirt? Now we are in DevCon. Actually, that was a great transition I did not mean to make we are in DevCon in case you didn't know talking about the OP stack And so this is kind of the time that we're just really talking about it And that means that this story is bridging into the future Okay, now we're in the future gal. Okay, so everyone in this future in our future everyone's future Contributing back to the stack right with shared modules. This is the lesson I literally came from a talk on, you know practical pluralism Everyone is able to share base layers share modules That's how innovation happens in this space and we can all benefit we can literally push the ecosystem forward And so there's lots coming down the pipeline literally so much We have this really nice code base that we're releasing very soon with bedrock. It's super hype. It's clean It's like the cleanest but there are things that we can make improvements to Such as introducing multi-client faultproofs such as introducing multi-client ZK proofs and critically This means that deploying a you know deploying one of these op chains We're calling them it doesn't tie you to a single proof system It doesn't tie you to a single technology You can have a ZK roll-up with a seamless upgrade so that no one even has to notice You're just lowering the withdrawal times in the background right these kinds of things happen because you have clean APIs Where you can separate and plug things in and Additionally we got you know plasma consensus for some ZK plasma for super scalable op chains and You know, we got a Pokemon execution apparently for a ZK Pokemon plasma Bitcoin, you know, whatever You know, this guy is the limit really so Everyone can benefit from these shared modules Really nice. So one person creates a little Greek statue, which is of course a great contribution to the op stack and boom Now it's in the op stack and boom everyone can adopt it. No problemo. It's great. And by the way, and Retroactive public goods funding right we're not doing this and the whole the whole reason why we got into this thing Was because we wanted to contribute back to the open-source software The stack that and then make sure that we would get paid even though we were building public goods And so of course, you know, people got to get paid for their their great Greek statues So with everyone contributing everyone gets paid. Everyone's happy. Let's go plasma groups dream is starting to be realized alright Well, that's not all y'all that's not all because right right now It's like oh, there's these little islands these op chains and they're they're doing their own thing But the reality is we are in this together Experimentation cannot should not must not equal fragmentation the same time as we're experimenting We need to unify we need to bring the user experience the developer experience everything together Because it's better right so that means that we're standardizing op chain security right when you reuse these modules you don't have all these crazy bridge hacks literally every week because Everyone is running the same software bending fitting from the same lindy effect of that software It's all you know proven formally proven multi-client whatever it is We need to standardize because it makes everyone stronger Additionally standardizing off chain tooling we noticed this with the EVM equivalence upgrade everyone got to use their tooling from before and standardizing off chain governance everything from building governance modules to even Introducing people into the collective through an identity layer so that we can have democratically run governance all of those things are absolutely critical for people for us to share as a community and and It's important to note That just because you have two different options does not mean that they cannot communicate Atomically with one another right you can send a transaction to one op chain and have a flash loan atomic swap This is something that is very possible and it is enabled when everyone is running the same software and even shares a sequencing layer So no bridging who bridging bridging is lame. I don't like bridging. I like doing things That's not a doing thing. That's a doing thing to do a thing. Anyway very very That's how we design things. I mean really it is actually in some sense. Okay The OP stack is not about pushing people apart It's about bringing people together So we can all have a gerbil party together And so talking through loud Now the final evolution right we're doing all these standards. We've got all this Composability we're getting to the point where like the software stack is maturing. It is this one thing We're all contributing to what does that mean that means that we are starting to form a super structure Not just defined by this or that, you know op chain doing this thing this saw, you know, we're actually Bringing people together with the network effects of cooperation to form something that is entirely new and What is that thing? Well, if you remember the beginning of the talk you might start to find out as the Islands configure Bono the super chain. We're back baby the super chain I told you I was gonna do it. That would be weird if I didn't anyway The super chain birthed through the OP stack through these standards through the shared compatibility The atomic composition shared sequencer set we start seeing this thing the replacement of the web to infrastack With decentralized alternatives that can power horizontally scalable applications like we're talking about the internet's computation and this is not multi-chain, right? Op chains are not app chains. Everyone is a part of the collective. We're all part of this network Additionally, this is not the mono chain, right? Because at the same time is we're all interconnected. We're also not, you know, the same, right? There is still multiplicity. There's still biodiversity and it's horizontally scalable. So instead It's all connected by the same technical and social fabric. It is not the multi-chain It's not the mono chain. Tell your friends y'all. It's a super chain. Let's go But wait, but wait, I just went ham on some tech Let me just real quick bring it back to why we are here because I forget that literally I get so into the tech It's so much fun. Anyway But we are here because we are forming new technological social institutions We are forming the optimism collective why we want humans to be valued over capital We want identity citizens, etc. We want impact to be profitable We want to build the optimism collective and just contextualizing this why now, right? Why is this so critical now?  My life is crazy. So Today we are living in a world where profit-maximizing Corporations they are the ones that are operating our our social public infrastructure, right? I can't post on the internet without going through a privately owned corporation also We're literally we are confronted daily with global coordination failures from conflict to biological stuff like it is getting terrifying and We're doing this in this crazy melting pot World very misaligned All while we're about to birth a super intelligence that's gonna look at our economy and be like oh, yeah So you the way that the things that we reward in this system is extraction and you know bad behavior, right? That this is terrifying to me. Our future is not guaranteed. We need to build this thing This is not not an isolated problem so right unprecedented times require Unprecedented social technology the end of the day blockchain is a social technology. It what it's what brings us together It's the social problems that we're fixing on the internet today reframing those incentives So that's why We're building the OP stack as an open source public good, right? We're funding public goods Retroactively we need to be doing this on a massive scale our social institutions for funding public goods are not adequate and We need to be providing people identities. So we measure human utility not just You know shareholder profits so we can maximize impact and Give profit to people and that's why we're building the optimism collective and That's because together we can make impact equal profit and summon either Phoenix.  Anyway, it's just like the pull towards utopia Our better selves either Phoenix. So that's how right we started out as Building out we built out this OP stack because we realize that's how we push open source forward We that is going to become the superchain and that will all power the optimism collective Which will align incentives and y'all please come contribute align your incentives with us and stay optimistic and Thank you very much all the loves all the hearts. I'm out of time


Hello, and welcome to this session in which we will discuss itemized deductions that goes on schedule a The first thing we need to know about itemized deduction is they are deduction from a GI not for a GI What does that mean? I know I keep repeating this but it's worth remembering You have your 1040 on your 1040. There is a line called adjusted gross income We have certain deduction that are deducted before a GI We call them for a GI before a GI itemized deduction are deducted after from Adjusted gross income. So that's important and those expenses those deductions By nature. They are personal expenses Simply put they are not trade. They don't belong to your business. They are personal in nature Now personal include if you are an employee or if you have investment But again, if you if you're following my lectures employee and investment deductions are suspended from the year 2015-2018 not 2015-2018 to 2025 so what we are left with is other itemized deduction other than employee and investment deduction and These deductions are subject to individual limit and must be collectively Exceeds the standard deduction so the itemized deduction are only good if you add them all up and we're gonna see what they are all of them When you add them all up all the itemized deductions They have to be greater than the standard deduction now How much is the standard deduction the standard deduction is a number given by the government every year every year They tell you the standard deduction is 28,000 or 32,000 I'm making these numbers up. I'm not specific to any year So, you know because it's gonna change every year. So the only you would use those schedule a Only if they are greater than the standard deduction Otherwise, if you don't have enough of them, you don't use them You would just take the standard deduction, which is you will take a deduction given by the government Otherwise, you would use the standard deduction now. There are less usage of schedule a why two reasons Why people are using less and less schedule a one as I just mentioned there are certain deduction that are suspended And those are employee and investment expenses that are personal in nature between 2018 and 2025 that's one reason the second reason is this When the tax law was changed in 2017 During the president Trump administration what president Trump did he increased the standard deduction He took away that some deductions, but he increased the standard deduction and the purpose was To simplify the process simply put I'm just gonna give you this the standard deduction this way You don't have to worry about adding up all those itemized deductions will which consists of medical and dental expenses specific taxes Interest paid on mortgage and investments Cheerable contribution and other miscellaneous expenses, which are suspended. So we're gonna do we discuss miscellaneous expenses When we talked about deductions for employer and employee what we're gonna do we're gonna in this session We're gonna discuss specifically medical and dental expenses and medical and dental expenses This is a schedule a so you can see the form and Goes in this section right here medical and dental expenses Then we discuss taxes then we discuss interest and we discuss charitable contribution So I'm gonna focus on one topic at a time starting with medical and dental expenses to notice here It's medical and dental so let's go ahead and get started before we proceed any further I have a public announcement about my company farhat lectures calm Farhat accounting lectures is a supplemental educational tool That's gonna help you with your CPA exam preparation as well as your accounting courses My CPA material is aligned with your CPA review course such as Becker Roger Wiley Gleam miles my accounting courses are aligned with your accounting courses broken down by chapter and topics My resources consist of Lectures multiple choice questions true false questions as well as exercises go ahead start your free trial today Medical and dental expenses the first thing you need to do is they need to exceed to be deductible They need to exceed 7.5 percent of adjusted gross income, and if you look at the form itself It says here multiply line 2 by 7.5 percent So they have to exceed your adjusted gross income now why and what does that mean? Well, here's what happened when the government wants to raise your taxes What they would do is this one way to do it is to simply they raise the rate For example, the tax rate is 20% they can make it 24% Another way to do it is to is to start to put those Thresholds basically something is deductible. However, it has to exceed a certain amount So once it has to exceed a certain amount you technically most people would lose the deduction and they lose in the deduction They increase your taxes. So this is what the government do They would take away the deduction without taking it away. It used to be 10% used to be you have to even have It was higher threshold at some point Historically, there was no threshold for medical expenses. Then they started to impose this threshold This is historical lesson So medical expenses are deductible to the extent reenbuy unreimbursed medical expenses unreimbursed means you did not get money for them Exceeds 7.5 percent of adjusted gross income so that the first thing we want to learn about this for example Emily H24 her adjusted gross income is 40,000 her medical expenses are 5,000 how much can she deduct? Well, she can only deduct 2,000. How did we come up with this? Well, her unreimbursed medical expenses are $5,000 then the only thing that's deductible is 7.5% in excess of 40,000 and that's 3,000 So she has she's 2,000 in excess of 7.5 because 5,000 minus 3,000 equal to 2,000 Now let's assume on the other hand Emily was reimbursed the insurance paid her of the 5,000 that she incurred they embarrassed her three It means all what you have left is 2,000 then what would be her deduction? Well 5,000 minus 3,000 what's left is to well now if we take 2,000 and replace the 2,000 here 2,000 minus 3,000 equal to a negative thousand She doesn't get any deduction because the 2,000 is less than 7.5% of her adjusted gross income because once the insurance reimbursed you simply put in the real world This this medical expense this medical expense is seldom taken because again You have to have so much to exceed 7.5 and most people they got insurance or they got their Expenses reimbursed, but this is the formula. This is the formula you will take Your unreimbursed qualify medical expenses you deduct from them for example for Emily. It was 5,000 So can she deduct the 5,000? No She have to she have to reduce it by her adjustments minus 3,000 then minus 7.5 percent of Her AGI and by the time you get the 7.5 percent of her AGI. That's another 3,000 because 40,000 times 7.5 what's left for her is a negative so she cannot deduct the only place where I saw this is Alcohol program where the insurance does not reimburse alcohol recovery alcohol and drug recovery The one that I worked with in the real world. Otherwise that deduction I sell them sell them see or someone had a major operation It was not covered in through insurance. That's another way What are some medical expenses that are deductible now? This is a list and this list those two lists are not exhaustive So you might be saying how would I remember this for the exam? Well, here's some tips for you Remember they are medical and dental medical and dental that's the first thing you want to remember So anything that's medical and dental and it's required by a hospital by a doctor It is deductible test to be required doctor and dentists fees hospital and nursing home expenses Not any type of medication prescription medication. They have to be prescribed health insurance premium Which we'll talk about later long-term care services and premium will talk about later medical equipment and supplies as long as they are Required transportation expense will talk about a little bit more later Those are we need to talk a little bit more about so you will remember them Including smoking cessation program guide dogs and Service animals including their training and care hearing aid and batteries anything that's required eye exam glasses contact lenses Physical therapy and rehab expenses home home modification for medical expenses. We'll talk about those Now what's not deductible? I think it's easier to kind of learn what's not deductible Something over the counter. It means that it's not prescribed by a doctor unless it's a prescribed It's not for example health club and gym membership. It's a great to go to the gym It's healthy, but it's not deductible cosmetic procedures unless it's medically necessary and I will show you an example Non-prescription vitamins or supplement elective surgeries notice here. It's elective elective treatment funeral or burial expenses Non-prescription non-prescription weight loss. Those are not deductible. Obviously illegal medical treatment or drugs. Obviously HSA Health related expenses reimbursed by insurance health related expenses medical expenses paid by a pre contribution Which is an HSA or flexible account? Those are not deductible Let's start to talk about To go little bit and details into what's deductible and what's not starting with cosmetic surgery As I said if it's elective, it's not deductible John 68 paid 15,000 to a plastic surgeon for a facelift procedure the sole purpose is to enhance and hence his appearance Not deductible not medically necessary the 15,000 does not qualify on the other hand Sarah Experience facial disfigurement due to a severe burn incident as a direct consequences of the accident of the incident the cost of Restorative cosmetic surgery undertaken by Sarah. Let's assume 15,000 Would be deductible medical expense How about nursing home when you put someone in a nursing home? Is this deductible or not? Well, if the primary purpose of residing in a nursing home or home for the age is to receive medical care Notice is to receive medical care the expense associated with the care including meals and lodging are deductible for medical expenses So if they put you there and the nurse if you put someone in the nursing home and the reason for that is to medically take care of you Okay, not for the convenience of the family, then it's deductible. However of the primary reason and in such facility as Personal personal means you just you would rather be in a nursing home rather than being home served by the family It's your choice any costs related to medical or nursing can still be deductible However meals and lodging because meals and lodging will be a separate cost is not so the medical care is Deductible if it's up if it's optional meals and lodging. It's not because you can be home and you're not home So for example, Olivia has a chronic Heart issue requiring special specialized medical Treatment and nursing care in January her family made a decision to admit her to a nursing home That could take care of her and necessary health care services throughout the year the total expenses of The nursing home amounted to 90,000 and those nursing costs can amount to a lot Among these expenses 60,000 were attributed to medical and nursing care Which is deductible now due to Olivia's substantial need for medical and nursing care and the primary purpose of her replacement in the Facility the entire 90,000 which is lodging and meals is also deductible because she needed that specialized care She wasn't there because her family doesn't want to take care of her because Or she chose that she was there necessary Now sometimes what you have to do you have to put your dependent child and a and a mental or physical disability school or institution are these tuition Deductible well tuition expenses for a dependent attending a special school for individual with mental or physical disabilities Might be deductible. Okay to qualify the primary reason is it must be specialized Resources for addressing the individual impairment. So whatever they are serviced in this in this child It's a specialized service and it's needed. You cannot you cannot provide the service at your home in such cases both Tuition and cost for meals and lodging can be claimed as a deductible expense What could be an example Christopher's son Ethan attended public school until the seventh grade? however Due to Ethan's difficulties and academic struggle. He underwent an evaluation and was diagnosed with ADHD attention deficit hyperactivity disorder and Based on the psychiatric recommendation Chris made the decision to enroll him in a private school that specialized Specialized notice specialized in providing individual attention to students with learning disabilities such as ADHD Well, the school offer a specialized curriculum developed by a team of educational and psychological professional Well, the expenses of attending the school along the cost of any psychiatric here are medical deductible expenses Something you have to do you have to incur a capital expenditure You have to change something in your home for medical expenses For example, if you have a back pain, you might have you the doctor might recommend a pool While you have to build a pool or if you cannot go upstairs You need an elevator. They would recommend to put an elevator the rule for capital expenditure is as follow if Dedicated by medical necessity. It's deductible, but let's talk a little bit more specific. That's the general rule First of all a doctor a physician must determine the medical necessity. You don't determine it and the usage of that of That facility has to be primarily for the patient So if you build the pool, the reason is not because the family wants to have it because it's needed for a year back The cost must be reasonable. You cannot just build the pool. That's unreasonable, you know, all the Whistles and what's where it's not needed Example of qualifying capital expenditure dust elimination system for example for breathing if you have issues with breathing elevator If you cannot go upstairs then specially designed for wheelchair bound individual, for example, if you have a van and you have to put in it like Wheelchair that's that's going to lift an individual Additional qualified expenses may include swimming pool if there's no access to a neighborhood pool They'll ask you, you know, if you have an access to a neighborhood pool, then you can go there Okay, a non permanent air conditioner such as window unit. Those are deductible as well a little bit more about capital expenditure Both permanent Improvement and their associated operating expenses is eligible for medical expenses So after you put the elevator or that pool any additional maintenance is deductible It's it's deductible in the year incurred. So as you maintain those facilities Those assets that you added they are deductible. You don't take any depreciation on these assets Why because when you install the pool the full amount is taken in that year So so you don't depreciate because you took the whole deduction Okay It's it's not in your benefit to depreciate because you want to take the full amount to exceed the 7.5 percent of adjusted gross income The cost that's deductible the cost is deductible to the extent it exceeds the increase in value of the related property What does that mean would look at an example? So you do is you're gonna appraise your home after the capital improvement and determine this, okay So let's take a look at an example James suffered from a heart disease and his doctor recommended installation of an elevator in his home Great to avoid climbing stairs the cost of installing the elevator amounted to 12,000 So how much can you deduct you will take the cost minus any increase in value because you benefited from this 12,000 You benefit at 5,000 what's left is 7 so your net cost Your net cost is 7 and this is what we meant here by the cost is deductible to the extent it exceeds the increase in fair value, okay Ongoing utilities expense and maintenance costs for the elevator are treated as medical expenses as we mentioned as long as the medical Necessity for the capital expenditure persists. So if James became better then we no longer take those deduction Transportation cost incurred for medical care. So what do we have to do you have to travel? For example, you have to go to New York City or Philadelphia to a bigger city to have medical treatment Deductible expenses are subject to an adjusted gross income floor just like everything else and deductible expenses include fares, taxi, train, plane, charges for ambulance services and out-of-pocket cost for using personal vehicle So transportation expense is deductible or you could use a government Mileage allowance subject to change. I'm not gonna mention it because it's gonna change every year could be like 50 cent per mile or 30 cent per mile, whatever that mile is Also deductible transportation expenses include parking fees if you have to pay for parking fees tolls Costs of accompanying individual like family member or nurses However, the cost of meals during travel for medical purposes is not deductible because you have to eat whether you are home or Traveling physically handicapped individuals. Sometimes what you have to do is you have to make certain expenditure capital expenditure Made to facilitate independent living and productivity for physically handicapped individual and those would qualify as medical expenses For example, you must widen the hallways So this individual they can push themselves and the doorways they can go in and out Install support bars and railings and adjust electrical outlets and fixtures so they can turn the electricity on and off These expenses are Necessary and These expenses are subject only to the adjusted gross income test floor with no increase in the home value considered So remember when we installed the elevator for James We looked at the ink the cost and we subtract the increase in fair value and what we deducted only the 7000 for physically handicapped individual. We don't Reduce the value of the house. We don't reduce the increase in value. We don't have that It's only subject to the 7.5 percent floor How about spouse and independent medical expenses? Well when calculating the medical expenses deduction the taxpayer can include the medical Expenses for their spouse and any dependent now for the dependent and the spouse There's no you don't subject this to a joint return or gross income It doesn't matter what their gross income is and joint return Okay, for example Christopher age 22 is married and enrolled as a full-time student at a university throughout the year Christopher incurred medical expenses that were covered by his mother Olivia now Olivia provided over one half of Christopher's financial support for the year Even if Christopher files a joint return with his wife Olivia is eligible to claim the medical expenses because the joint return is not a factor in that So his mother can claim his medical expenses on her return Okay, so Olivia would combine her own medical expenses wherever she has plus that of Christopher although He's married and he is filing with him. He's filing with his wife. It doesn't matter. She can get the deduction Divorce individual in the case of a divorce individual with children specific rules apply to the non-custodial parent So you you might be the non-custodial and you could still claim medical expenses That you paid for the child. Okay, even though they're not you're dependent of the non-custodial because you're the non-custodial Okay, so an example Alex and Emily and Emily's divorce last year Emily was granted custody of her child Ethan. So Ethan with Emily Throughout the year Alex covers three thousand of the medical expenses of Ethan. He's not the custodial That's fine. Despite Ethan's being Emily's dependent Alex has the ability to combine the three thousand with his medical expenses when calculate the medical expense deduction Lodging while away from home for medical care sometime you have to travel you have to stay in a hotel are these deductible? Well, if the following conditions are met one the lodging is for the primary purpose of medical care and Provided by a licensed physician in a hospital or similar medical facility and Most hospitals now they they have those facilities or they have they have a relationship with others reasonable It has to be reasonable. Okay, it cannot be too much and The travel does not need to involve significant personal pleasure Also, lodging expenses is limited. How much can you deduct is $50 per night per person? But I believe it's very it's very small for hotel costs these days and this deduction applies Not only to patient but also to any accompanying individual who must travel with the patient Now meals expenses are not deductible unless they are directly related to a medical care To the medical care and provided at medical facility So they have to be for example healthy food and they are provided at the medical facility again some hospital They do have those kind of like hotel medical facilities if these meals qualify for a deduction They are not subject to 50% they are 100% deductible those medical meals How about medical insurance premium when you when you have insurance is that deductible? Well, medical insurance being either under a group plan or an individual plan is Included with other medical expenses now sometime after in the US if you work for a company the employer Your company pays all or part of the medical insurance. Okay? Now the amount paid by the employer is not included in your income. So what happened is this? The the company pays for your medical insurance and they don't include it in your income now bear in mind Although they don't include it in your income It's deductible by your company. So your company deduct this as a Expense for a GI that's as far as the company is concerned. It's a business expense having as an employee Now once they pay for it It's not deductible by you so you cannot deduct the medical insurance expense because you are getting the insurance expense basically free Not free you work for it. It's not deductible, but it's not subject to tax You cannot deduct it because you did not pay taxes on that money, but it's deductible by your employer Now the taxpayer is self-employed now what you do is you are the employer and the employee Insurance premium paid for medical coverage including your spouse and dependent or dependents are deductible as a business expense for a GI Okay So if you have your own company and you're using you're paying your own insurance, then that's deductible now Deduction is not allowed if the taxpayer is eligible to participate in an employer-provided plan or the taxpayer spouse for that matter What does that mean? Let's assume I have my own company Can I deduct my medical insurance? I can as long as I don't work for another company that offer medical insurance or my wife Works for another company in offer it if they do then I cannot deduct my medical insurance because you do have other option When can you deduct year of deduction? When can you deduct? Well medical expenses can only be deducted in the year They are paid regardless of the taxpayer accounting method now most taxpayer accounting method use the cash basis anyway So it's when you pay it and you cannot prepay and deduct You know the payment has to be related to a medical expense. Let's take a look at an example at the recommendation of his dentist Marcus seek consultation from dr. Johnson Specializing in restorative dental work dr. Johnson informed Marcus that the necessary restorative restorative work He recommended it to cost 15,000 and require a 40% prepayment notice it requires for all new patients Marcus paid the 6,000 in 20x3 and the remaining balance in 20x4 so notice the payments were since two separate years in this scenario Marcus can claim medical expenses 6,000 for x3 and 9,000 and 9,000 in 2024 Now now what if Marcus paid the full amount in 20x3? It's not deductible Now you are better off paying everything in one year because you want that They want this amount as high as possible so you could exceed the adjusted gross income How about reimbursement when we have reimbursement reimbursement means is when they pay you when they pay you some money back by the insurance? reimbursement for medical expenses received in the same year Simply reduce the medical expense deduction as I told you you have your medical expense deduction Minus the insurance reimbursement in what's left then has to exceed 7.5% as I told you at the beginning okay now Sometime what happened is this you would receive reimbursement you would receive reimbursement in a different year where you had the deduction in one year You would receive the reimbursement in a different year under the tax benefit rule Which we covered in a separate recording if the taxpayer received insurance for medical expenses that were deducted So year one you had a deduction year two You got the money back well if you got the money back and you took the deduction you have to go back and Include not go back include the income in year two to the extent that that deduction benefited you okay However, if you did not itemized in other words in the year of expense were paid you don't include that income So if you don't get a benefit you don't include income. Let's take a look at an example Ethan had an AGI of 45,020 x3. He experienced an unfortunate car accident that resulted in 4,000 in hospital expenses and 1,700 in doctor bills also incurred 600 in medical expenses for his dependent child in 20x4 here he received a reimbursement at 950 from the insurance company. So the medical expenses threshold for the year one or year three is 3,375 which is 7.5% of 45,000 now his medical expenses amounted to 6,600 all together when we deduct the difference the medical expenses minus the 7.5% of AGI he have left 3,250 and this is how much he can deduct now when he receives the 950 from the insurance company he got benefit He'll have to include that in his income because he benefited 3,250 the prior year what should you do now you should go to far hat lectures and look at additional resources MCQs true false that's gonna help you understand this topic better in the next session what I'm gonna do after I cover the Medical expenses.  Good luck study hard and of course stay safe