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Money June 2018

Dollar Sense

Supporting Your Elderly Parent? What Medical Costs Can You Still Deduct, for Them and For Yourself?

By Teresa Ambord

If you’re supporting an elderly parent, you may know that, beginning this year, you can no longer claim a dependent exemption for a parent as both the personal and dependent exemptions have been eliminated.

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It may pay to move any elective medical expenses that you can into 2018. Order that new pair of glasses, schedule that dental work that you were putting off till next January and get it done this year instead, refill expensive prescriptions in December if you can.

The Tax Cuts and Jobs Act changed the ways some of us can deduct certain expenses. If you’re supporting an elderly parent, you may know that, beginning this year, you can no longer claim a dependent exemption for a parent as both the personal and dependent exemptions have been eliminated. But that change doesn’t stand alone. The medical expense deduction, for example is better than it was, at least for this year.

 

The Medical Threshold Got Better

The chances of taking a deduction for medical expenses has improved. For a long time it was static. You could only deduct medical expenses to the extent those expenses exceeded 7.5% of your adjusted gross income. For most people that meant no deduction.

In 2013 that situation grew worse, when the percentage was raised to 10% (except for certain people who were 65 or very close). That meant if your adjusted gross income was $75,000 multiplied by 10%, you could only deduct medical expense over $7,500. So, if you spent $8,000 on doctor bills, you could only deduct the difference, or $500 ($75,000 x 10%-$8,000= $500).

Late in 2017, yet another change was made, which caused the percentage that applies to medical expense to revert to the previous level of 7.5%, for 2017 and 2018. Using the same example as above, here’s how much difference that makes. Instead of a medical deduction of only $500, you can deduct $2,375. ($75,000 x 7.5% - $8,000= $2,375).

Once again, this 7.5% ends this year, unless Congress acts to renew it. So, it may pay to move any elective medical expenses that you can into 2018. Order that new pair of glasses, schedule that dental work that you were putting off till January and get it done this year instead, refill expensive prescriptions in December if you can. Even though you cannot take a dependent exemption for people you support, you can deduct medical expenses you pay for people who would qualify as your dependents (meaning you pay over half of their support). Just add those amounts to your own, to reach the 7.5% threshold.

 

Insurance Premiums

When calculating your itemized medical expense deductions, don’t forget insurance premiums you pay for medical, dental, vision-care, Medicare parts A, B, D and Medigap, and long-term care insurance (LTC). LTC insurance premiums are subject to a yearly limit which is adjusted annually.

For 2018 the amount of LTC insurance premiums you can deduct are:

Age 40 or under, $420Mileage for Medical Purposes

While you’re keeping track of your expenses (preferably in a cost journal or on a calendar of some sort) don’t forget to total your miles driven for medical purposes. This year, the rate you can deduct went up one cent per mile, to 18 cents.

 

SIDEBAR: What does the IRS Call an Approved Medical Expense?

Here are a few:

Ambulance

Artificial teeth

Eye surgery

Hospitalization

Lab fees

Oxygen

Smoking cessation program

Therapy

X-rays

For a more complete list, check the index in IRS Publication 502  (https:www.irs.gov/publications/p502)

 

Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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