The deduction for qualified medical expenses has survived yet another round of tax reform. The IRS will allow a tax payer to deduct expenses that exceed 7.5% of their adjusted gross income for 2017 and 2018. Beginning in 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.
For example, if you have a modified adjusted gross income of $50,000 and $5,470 of medical expenses, you would multiply $50,000 by 0.075 (7.5 percent) to find that only the expenses exceeding $3,750 can be deducted. This leaves you with a medical expense deduction of $1,720 (5,470 – 3,750).
Many elders who have been ordered into a professional care environment such as assisted living, may have qualified care expenses of $30,000, $40,000 or more annually. Often times, the elder relies on other parties such as their children to supplement their care expenses. Regardless of the amount, “anyone” who is contributing to the direct care expenses of themselves or a loved one, should seek qualified tax services from an Enrolled Agent or CPA to determine if those expenses are deductible. Considering the a mount of money and complexity of claiming these expenses, I do not recommend using on-line Internet Tax or Shopping Mall type tax preparation services. Many of these face to face data collection persons are customer service agents with minimal, if any, actual tax training or credentials. You have the right to claim these deductions – if it is done properly.
Also, for those who used an Irrevocable Trust to re-position assets, you should meet with your Attorney, Enrolled Agent or CPA to discuss if you will be required to file a 1041 tax return.
One big tip for those receiving VA Aid and Attendance. Some professionals recommend you file a 1040 and claim your care expenses – even if you are exempt from filing. Remember, the VA is tasked with verifying your care expenses exceed your income annually. By filing the 1040, it makes their job easy. By not filing a 1040, make certain you keep a close eye for any correspondence from the VA. If you fail to respond timely, they may terminate your monthly benefit.
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