Seniors Still Have Time For Tax Breaks For 2015
As tax time rolls around, we tend to begin looking for tax breaks, deductions and exemptions that eluded us all year round. As one practitioner stated in a recent meeting “at this point I have finished with 2015 and am beginning the new year.”
For those of us who are not so inclined to give up on tax breaks for now and move into the future and, especially for seniors, here are some top tax breaks you might consider both in the claiming for 2015 and going forward into 2016. Inspiration in this regard is given to an article in Find Law, a legal publication, called “Top Seven Senior Tax Breaks” www.findlaw.com, but with my own commentary and updating for 2016.
Medical and Dental Expenses. Medical expenses take a serious bite from many senior’s incomes. If you itemize your deductions or if you never did before and find that, in 2015, you have more unreimbursed medical expense than before, you should know that seniors age 65 and older still may claim medical and dental expenses exceeding 7.5% of adjusted gross income. For everyone else the figure is expense exceeding 10% of adjusted gross income.
Theobservation regarding deduction of medical expense is especially relevant to individuals and couples who are experiencing personal care/assisted living or nursing home expense for the first time. In many cases taxpayers are concerned because the cost of care has forced them to liquidate appreciated investments such as highly appreciated stocks or IRA’s, or other tax qualified funds such as 401(k)’s or 403(b)’s. The tax exposure in liquidating these accounts can cause families already concerned about cost the cost of care to now worry about their IRS bill.
I have written several columns on this subject over the years but, suffice it to say, the entire cost of personal care/assisted living and of nursing home care paid by the taxpayer can in the majority of cases be considered in running the 7.5% calculation. Even if you receive a statement from a facility or community stating only a portion of the cost can be considered to be a medical deduction, you should reexamine this conclusion. The same standard that determines whether an individual qualifies for tax favored treatment for long term care insurance applies to this deduction. You need to be unable to perform two activities of daily living without substantial assistance or suffer severe cognitive impairment. Our office uses a standard format to be completed by the resident’s regular or treating physician and the physician needs to have examined the resident within the 12 months prior.
When the medical deduction on Schedule A is used to offset the tax exposure of liquidating appreciated or tax qualified (retirement related) assets, very often the tax exposure is seriously reduced or eliminated entirely.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.