ConquerTax Reform Headaches!
As a result of Tax Reform, most of my clients had surprises on their 2018 tax returns. The best way to avoid surprises in 2019 is to understand and take control of your tax situation. You have a few months left to do it in 2019. Some taxpayers will be able to use their standard deduction for 2019 ($12,200 for singles and $24,400 for joint filers) instead of itemized deductions (medical, mortgage interest, etc.). However, most of my clients use itemized deductions. In the last WealthWISe, I showed you how to use less known charitable deductions to beat the standard deduction. In this WealthWISe I will focus on other itemized deductions, like unusua medical deductions. Read on.
Less known Medical Deductions Make the most of these because you can deduct only the excess of Medical Deductions over 7.5% of adjusted gross income. However, sometimes health insurance premiums alone, if not reimbursed, will so the job. You can deduct premiums for yourself, your spouse and your dependents. Don’t forget Medicare premiums that are taken from Social security benefits. You can deduct long term care premiums but not if paid for a “hybrid” policy that combines life insurance with coverage for long-term care.
Self-employed taxpayers who are not covered by health insurance subsidized by an employer can deduct their health care insurance premiums as adjustments to income on Form 1040 thus avoiding the 7.5% floor.
Less known medical deductions include just about anything prescribed by a doctor and the cost of acupuncture and chiropractor services. You can deduct laser eye surgery Also, you can deduct 20 cents per mile driven for medical reasons. For a service animal that helps a disabled person, you can deduct the costs of buying, training, and maintaining the animal. You can also deduct expenses for food, grooming, and veterinary care. See IRS Publication 502, Medical and Dental Expenses.
Home modifications or improvements to help a medical condition, such as wheelchair ramps, support bars, and handrails can qualify, except to the extent that they increase the fair market value of your property. For example, one of my clients installed a heated exercise pool to help with recovery from knee operations. It cost $12,000 but it did not increase the value of the house. In fact, if the house were sold it would require a crane to remove it. So she could deduct $12,000. To be deductible, the improvements must be made for medical, not architectural or aesthetic reasons. and all or a part of physician-prescribed home improvements
One great trick is to prepay or delay expenses into a year so as to exceed the standard deduction then take the standard deduction in the year that is thereby lowered.