By: Richard (“Rick”) I. Kantner, Jr., Esq., The Kantner Law Firm, PL
It is just about that time of year again as April 15th is fast approaching on the calendar. Are you searching for additional deductions? Well, an often-overlooked aspect of dealing with our elderly clients, patients, and even our own family members is the tax deductibility of medical costs incurred. Though a tax deduction does not provide additional or new sources of income to pay for eldercare, the tax savings realized could stretch the dollars and make the difference between being able to pay for home-based healthcare services or assisted living.
If you itemize deductions on Form 1040, Schedule A, you may be able to deduct expenses paid during the year for medical and dental care, for yourself, a spouse, and any dependents. This is very important to remember at tax time and could mean substantial tax savings. In order to qualify, your total medical expenses for the year must exceed 7.5% (10% beginning December 31, 2012) of the taxpayer’s adjusted gross income (AGI).
Example: Your AGI is $40,000, 7.5% of which is $3,000. You paid medical expenses of $2,500. You cannot deduct any of your medical expenses because they are not more than 7.5% of your AGI.
Medical care expenses include those more obvious things such as out-of-pocket costs for diagnosis, treatments, and other medical remedies, however, don’t forget that it can also include the insurance premiums paid for policies that cover medical care such as Medicare Part B and D, or for a qualified long-term care insurance policy.
If the taxpayer is also claiming a separate person as a dependent, the taxpayer can add their medical and dental expenses to his or her own to add up to the 7.5% requirement for deductibility. I commonly find situations where the adult child or children of the care recipient have been financially assisting a parent or parents with medical costs. To be able to claim another person’s medical expenses on a tax return, the taxpayer must pay over half of the person’s financial support, and be related to that person or lived with that person for a full calendar year. Where more than one person has assisted with the costs of medical care, only one person may claim the deduction and it should be based upon an agreement among the parties providing the financial support.
In order to qualify as a dependent, the person’s gross income for the year must be less than $3,650, however certain income sources are exempt from this total such as Social Security and Supplemental Security Income.
What is a “Medical and Dental Expense”? Medical and dental expenses can include a wide array of different types of procedures, medicines, and care providers. IRS Publication 502, Medical and Dental Expenses, available at www.IRS.gov, provides a list of allowable medical and dental expenses. Some, but not all, of the expenses permitted are as follows:
- Payments of fees to doctors, dentists, surgeons, chiropractors, and psychologists
- Payments for transportation to receive medical care such as taxi, bus, ambulance, and even personal vehicle out-of-pocket costs such as for oil and gas, or the amount of the standard IRS mileage rate
- Premiums paid for health insurance and qualified long-term care insurance policies (limitations apply)
- Medical equipment to include crutches, wheelchairs, hearing aids, contact lenses and glasses, oxygen equipment, and even modifications to the home for handrails, grab bars, and wheelchair ramps
- Personal care items such as disposable diapers
- Entrance fees for assisted living facilities, including continuing care facilities (they should be able to provide you with a breakdown of what portion of fees are attributable to medical costs)
You cannot deduct over-the-counter medicine, toiletries, cosmetics, vitamins, or funeral and burial expenses, or prescription medicine costs that were reimbursed.
There are many other expenses that may be allowable that are not included in this article, therefore you should personally review the IRS guidelines as provided in Publication 502, or speak to your tax return preparer.
Richard (“Rick”) I. Kantner, Jr., was admitted to the Florida Bar in 1993, and his practices areas include Estate Planning, Elder Law, Probate Administration, and Medicaid and V.A. Benefits Planning. Mr. Kantner is a member of the National Academy of Elder Law Attorneys (“NAELA”) and the Elder Law Section of the Florida Bar. Offices in St. Petersburg, Largo/Belleair, and Palm Harbor, Florida.
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The Kantner Law Firm, PL
Contact: Richard Kantner
Work 31 Beach Drive, SE Bayfront Tower St. Petersburg, Florida 33701 United States
Work Phone: 727-781-8201
Work Email: rick@attorneykantner.com
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