Do Your Taxes Need A Check-Up?

Unfortunately the IRS notes in Publication 502, that medical expense deductions “do not include…..vitamins or a vacation." So, what can be deducted?

One of the most important major changes impacting taxpayers beginning in 2017 is the allowance of medical deductions which exceed 10 percent of one’s adjusted gross income. In 2016, people 65 years and older were allowed to deduct medical costs that exceeded 7.5 percent of their adjusted gross income. Now everyone is on a level playing field with the 10 percent requirement.

Keeping track of medical related costs such as co-pays, prescriptions, and often forgotten, mileage for driving to medical appointments. These miles can add up and might push you over the 10 percent limit. You can also deduct costs for eyeglasses, chiropractic services, acupuncture, travel expenses, home renovations, reclining chairs, therapeutic swimming, whirlpool baths, wigs, artificial teeth and various other qualifying items. There are certain rules in which some of these qualify and a professional tax consultant can evaluate your medical status to make sure you are not overlooking any of these possibilities if they apply to you.

Another hot topic for healthcare when it comes to taxes is of course, Obamacare, or Patient Protection and Affordable Care Act. The battle over repealing Obamacare is getting very real. However, it is still in effect for now through 2017. If you did not have health coverage in 2016 and don't qualify for a health coverage exemption, the penalty fee is 2.5% of your household income or $695 per adult ($347.50 per child), whichever is higher. And, the same will hold true for 2017.

There are also special rules often overlooked for medical deductions for children of separated parents. Even if a child is claimed as a dependent by one of the parent’s, the other parent can still deduct any medical fees associated with the same child. Keeping track of any medical fees you are paying or splitting can add up on top of yours, to reach that 10 percent limit.

You might also consider shifting out-of-pocket medical expenses into flexible spending accounts, health savings accounts or health reimbursement arrangements so that you can deduct the full amount of your medical expenses. Using a flexible spending account through an employer, or through a health savings account, you can set aside pre-tax dollars from your wages, and then use those pre-tax dollars to pay for medical and dental expenses.

The IRS has a list of close to 100 possible medical deductions. Sifting through all of the details can be cumbersome, so you might consider meeting with a CPA who works with these tax laws ongoing and can cover all the bases when evaluating your tax situation and medical expenditures. If you need assistance in filing your 2016 taxes, or strategizing your 2017 tax planning and financial goals, barton CPA is a reputable Coachella Valley firm and offers a complimentary consultation.

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