ElderLaw News — The Estate Planning & Elder Law Firm, P.C. — MD, VA, DC
ElderLaw News

ElderLaw News is a weekly e-newsletter that brings you reports of legal developments and other trends of vital interest to seniors and their advocates. This newsletter is brought to you by The Estate Planning & Elder Law Firm, P.C., William S. Fralin, Esq., President., William S. Fralin, Esq., President.

Health Care Deductions, Some New Considerations

If you thought you knew how to handle health care deductions in the past, well think again.

The rules have changed for 2013. Unfortunately, the changes are not in the consumer’s favor. So, to be a savvy consumer, you need to keep in mind the following considerations.

1) There are new thresholds for itemized medical deductions. Beginning in 2013 (unless you are 65 or older), the total cost of your medical expenses must be 10% of adjusted gross income (AGI), up from the previous level of 7.5% of AGI, in order to claim those expenses as a medical deduction. AGI is your annual income minus certain deductions like moving costs, IRA contributions, student loan interest, etc. The prior amount was difficult enough to reach, and now it is set higher. One silver lining for those who turn 65 during the 2013 calendar year or are older than 65, the level will remain at 7.5% until 2017, when it too will change to the 10% level.

2) Shift medical expenses to alternating years. If there is any discretion in when you incur certain medical expenses like elective surgery or when you get those new frames for your prescription glasses, then please do so. What this will mean is that, at least in some years, you will have spent enough to claim the medical deduction. For example, in 2013, if your income is $85,000 and your medical expenses are $10,000, you can claim a medical deduction of $1,500 (medical expenses {$10,000} minus 10% of income {$8,500}). In 2014, you might only have medical costs of $2,500, but at least in 2013, you will be able to claim the medical deduction instead of never.

3) Deduct medical expenses for a parent or grandparent, under certain conditions. Here you may get a bonus. If you pay for medical expenses for a dependent parent, you can add those to your own medical expenses when filing your tax return. That may allow you to meet the 10% threshold to make a claim. The one caveat is that in order to define your parent as dependent, you have to pay for over half of his/her living expenses during the year you are making the claim.

4) Long-term care insurance premiums can count as medical expenses. With certain limitations related to your age, you can count part of your long-term health insurance premiums as medical expenses. This can help you reach that magic 10% of AGI number to enable you to make a medical exemption claim. Consult yearly tables for the precise amount because the amounts are adjusted annually for inflation. However, to give one example, at age 40 or younger, you can count $350 of the long-term care premium; at ages 61-70, you can count $3,640 of the premium (relative to age as of 12-31-2013).

5) Flexible spending accounts (FSA) are the flip side of medical exemption claims. If you can’t meet the threshold of filing for a medical expenses claim, FSAs offer a back-door if they are available through your place of employment. Starting this year, even though they will now be capped at $2,500, a FSA allows you to set aside money in advance for medical expenses. Then, the amount that you set aside is deducted from your taxable annual salary. In essence, you are paying for medical expenses tax-free!

So, be smart during 2013 and use the new rules to your advantage. Best of luck! (Bill Bischoff, “How To Beat the New Rules for Health Deductions,” Wall Street Journal, January 16, 2013.)


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The Estate Planning & Elder Law Firm, P.C.

The Estate Planning & Elder Law Firm, P.C. is an elder law firm. We represent older persons, disabled persons, their families, and their advocates. The practice of elder law includes estate planning, estate and trust administration, powers of attorney, advance medical directives, titling of assets and designations of beneficiaries, guardianships, conservatorships, and public entitlements such as Medicaid, Medicare, Social Security, and SSI, disability planning, income tax planning and preparation, care management, and fiduciary services. For more information about The Estate Planning & Elder Law Firm, P.C., please visit our website at http://www.chroniccareadvocacy.com.

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