Thursday, August 8, 2013

The New Medical Expenses Deduction


Medical Expenses you paid during the year can qualify you for a deduction on your tax return via Schedule A. It does not matter when the services were provided. 

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IRS Pub 502 has a detailed explanation of the expenses that are deductible, suffice it to say any expenses incurred primarily to alleviate or prevent a physical or mental defect or illness are medical expenses. These expenses do not include those that are merely beneficial to general health, examples being, vitamins or vacations. The expenses can be incurred for yourself, your spouse and your dependents. 

Today's blog post is going to be primarily dealing with the change in the deduction for the Tax Year 2013. This change is effective for the 2013 Tax Return to be filed by you in 2014. You will be affected by this depending on your age, whether you are above or below 65.

Amount To Be Deducted

  • If you and your spouse are BOTH under age 65: Total un-reimbursed allowable medical & dental expenses that is more than 10% of your AGI (Adjusted Gross Income) from line 38 of Form 1040. 

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  • If you OR your spouse is age 65 or over: You are temporarily exempt from the increase! The exemption applies to any year beginning after 12/31/2012 and ending before 01/01/2017, if you or your spouse attained age 65 during or before the tax year.   
  • If you turned age 65 in 2014? 
On your 2013 Return: Use 10% of your AGI as a threshold
On your 2014 Return: Use 7.5% of your AGI as a threshold
From 2017 On-wards: Use 10% of your AGI as a threshold

  • The amount to be deducted will be figured using Lines 1                                                       through 4 of Schedule A, Form 1040. 
Records To Keep:

  • For each medical expense, the name & address of medical care provider paid and
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    the amount & date of each amount should be kept. 
  • In addition, a statement or itemized invoice showing the description of the care received, the person receiving the care and the nature & purpose of the care should be kept. 
  • These need not be sent to the IRS with your tax return.
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Please read my disclaimer here. For more questions regarding this and other matters, I can be contacted at manasa@mntaxsolutionsllc.com.