Happy New Year! It's not too early to start thinking about 2015 and 2016 income taxes and the one deduction that probably affects most readers. Medical deductions aren't just prescription meds, doctor visits and the like. With family medical costs rising yearly, it behooves us to familiarize ourselves with some surprising expenses we may never have given a thought. In fact, Bottom Line Personal recently featured an article that tells us about some outlandish yet legal medical deductions Uncle Sam allows taxpayers.
Ellen Phillips1. Insurance - Regardless of your plan, health insurance costs continue to rise. Last year, my husband and I ended up paying about $200 more a month than we used to, and I'm pretty sure many readers find themselves in the same boat. It pays to know which plans can save us in deductible expenses. A) Those self-employed folks who pay their own premiums and have earned income can deduct the premiums; B) Premiums for long-term care are deductible. I've long advised people to carry this type of insurance for protection as they age. The day may arrive when we need nursing home or at-home care, and these costs are humongous. Just remember, premiums rise with age: 40-50 is a good age to start for an affordable policy, but costs rise to more than $4,000 yearly when an insured reaches age 70; and C) Medicare Parts B and D premiums are deductible, too, as are Medigap and Medicare Advantage premiums.
2. Costs paid out for nondependents - Don't assume just because folks aren't your dependents, you're throwing money away with no financial benefit back to you. Check out the following eye-opener before closing the book: You may be shelling out big bucks to someone whose income is too high to qualify as a dependent. Bottom Line Personal offers the example of a parent who lives in a nursing home but you provide more than half his/her support.
3. Home improvements - From installation of an elevator in a multistory home medically necessary because of an impaired leg or surgery limitations to the relocation or modification of kitchen cabinets, unusual expenses occur from time to time. The IRS sometimes plays the good guy by helping us "pay" for the increase in home improvement value; for example, if that elevator costs $20,000 to install and increases the value by $10,000, the deductible amount becomes $15,000. On the other hand, modifications to meet the needs of an occupant with a limiting physical condition allows for a full deduction if, by modifying, you're not increasing home value. Not that polio was a good childhood illness for me by any means, but one upshot is the allowance of a pool and/or hot tub. The tax guys also give us operating cost deductions to maintain our pool (and former hot tub). Perhaps someone in your family suffers from a severe respiratory illness; central air-conditioning to alleviate the condition is deductible, as are really wild circumstances, such as clarinet lessons to help remedy a youngster's overbite or shifting the location or otherwise altering electrical outlets and fixtures. It really pays to investigate.
4. Travel and transportation - Local provider transportation costs - bus, car, taxi, train - equal deductible medical expenses. Furthermore, even though the IRS sometimes tries to limit long-distance travel expenses, these are legitimate claims. My long-ago best friend died of cancer at age 51. That last year, she and her husband went everywhere in an attempt to enter a study that might prolong her life. I recall a flight from Washington, D.C., to New York City for her to interview at Sloan-Kettering for a potential study. After her accountant told her the transportation expenses couldn't be deducted, I urged her to counteract his advice on her tax returns. Uncle Sam smiled in acceptance. (Research your own long-distance provider who could help your circumstances or, even, for an out-of-town conference where you learn more about a medical situation from which you or a relative suffers. And always ask for and keep transportation receipts.
5. Vehicle modifications - Family members who are disabled often need a special vehicle to accommodate their disabilities. If the circumstances mandate a customized new car, truck or van, then you may deduct the extra cost over a standard model's cost. Smaller modifications, such as special hand controls or pedals, also are deductible.
As consumer-savvy readers, please make one New Year resolution that can easily help your bank account: Claim all the medical deductions you're entitled to for 2015 and be sure to make and maintain a list for 2016 and beyond.
Contact Ellen Phillips at consumerwatch@timesfreepress.com.