Scarsdale accountant Paul Herman has all the answers to your personal finance questions!
Before this year, you could claim itemized deductions for medical expenses paid for you, your spouse, and your dependents to the extent those expenses exceeded 7.5% of your adjusted gross income (AGI).
But the rules have changed for the worse in 2013 and beyond.
Due to the 2010 Affordable Care Act, the old 7.5%-of-AGI hurdle is now 10% for most taxpayers in 2013. An exception applies for taxpayers, or their spouse if married, who are age 65 or older on December 31. They can still use the 7.5%-of-AGI threshold through 2016.
Many individuals have flexibility regarding when certain medical expenses will be incurred. They may benefit from concentrating expenses in alternating years. That way, an itemized medical expense deduction can be claimed every other year instead of lost completely if it doesn’t exceed the threshold.
Medical expenses paid for a taxpayer’s dependent, such as a parent or grandparent, can be added to the taxpayer’s own expenses for itemized medical expense deduction purposes. For a person (other than a qualified child) to be the taxpayer’s dependent, the taxpayer must pay more than half of that person’s support for the year. If that test is passed, the taxpayer can include medical expenses paid for the supported person—even if the taxpayer cannot claim a dependency exemption for that person. While the taxpayer must still clear the applicable AGI threshold to claim an itemized medical expense deduction, including a supported person’s expenses in the computation can really help.
Our Scarsdale tax preparers here at Herman & Company CPA’s are here for all your financial needs. Please contact us if you have questions about these provisions or any other tax compliance/planning issues, and to receive your free personal finance consultation!
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