Latest news with #HenryGrzes
Mint
a day ago
- Business
- Mint
A health crisis cost you a bundle. How to claw it back.
The medical tax deduction comes into play after a health crisis like a car accident or a cancer diagnosis, allowing you to write off some unreimbursed costs. Taxes aren't a priority when you are facing a health crisis. But once you recover, don't miss a valuable tax break called the medical tax deduction that could alleviate the emergency's financial toll—an oversight that happens all too often. Taxpayers 50 and over missed out on almost 40% in savings from this deduction, a recent analysis found. Nearly one in five failed to deduct $4,714 on average. Americans undergoing a major medical event or relying on assisted care at home or in a facility should put the deduction on their radar, tax experts say. Keeping detailed records through the year is key. 'Make sure you've got proof of payment for any out-of-pocket cost, everything to support that deduction," said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs. Taxpayers are allowed to deduct unreimbursed medical expenses for themselves, their spouse or their dependents if the costs total more than 7.5% of their adjusted gross income, or AGI. Only medical costs above that 7.5% threshold are deductible. For instance, if your AGI is $100,000, then 7.5% of that is $7,500. If your out-of-pocket medical costs total $7,000, nothing is deductible. But if those expenses added up to $12,000, then $4,500 of that can be written off. You must itemize to receive the benefit. 'If you choose the standard deduction, you don't get anything," Grzes said. Older households deduct about a quarter of their medical spending, the study last year found. That is just half of the medical costs eligible for the deduction. The analysis was based on data before the standard deduction was doubled in 2018, which could make the medical expense deduction less attractive. But out-of-pocket spending has jumped since the end of the pandemic and aging boomers are entering their costliest health years, potentially making the deduction beneficial for more taxpayers. One reason why people fail to take the deduction is because its benefit doesn't seem large enough to justify the work that goes into claiming it. 'It's more for people where it seems there's a higher return to claiming it, say, because you live in a high tax state," said Gopi Shah Goda, author of the study and a senior fellow at Brookings Institution. 'So for every dollar you deduct, you get a higher share of that dollar back in tax savings." Other folks aren't aware of the deduction or how to use it. Generally, taxpayers are often on 'autopilot," said Andy Phillips, vice president at the Tax Institute at H&R Block. There are various times when you should consider the deduction. The most obvious is after a catastrophic health event, such as a car accident or a cancer diagnosis. You can write off unreimbursed costs related to your hospital stay, follow-up doctor or treatment visits, and rehab or physical therapy. If you need to modify your home to accommodate a wheelchair, whatever isn't reimbursed can also be deducted. 'Same thing with transportation. You get a rate per mile," Grzes said. 'Say you're in a small rural community and you have to go to the Cleveland Clinic for some special treatment, that would be deductible." Another time to consider the deduction is if you or your spouse rely on assisted care, whether in home or at a facility. If a full-care facility is required for health reasons, its full cost, including meals and transportation, would be eligible for the deduction. If health isn't the primary reason you are living in an assisted-care home, then only the medical component of those costs are deductible. The facility itself typically provides a breakdown of what charges are attributed to medical care, Grze said. A taxpayer who teeters between itemizing and taking the standard deduction from year to year may want to check out the medical expense deduction. Adding in eligible medical costs to other deductions—like charitable donations or mortgage interest—may make itemizing the better option. Married couples who typically file jointly might find the deduction worthwhile if one spouse earns a lot less than the other, Phillips said. If the lower-earning spouse has large unreimbursed medical expenses during the year, filing separately as a married couple may be beneficial. 'This one is tricky, it's not one to do in a vacuum," he said. 'The challenge is you've got to run the math both ways." The biggest hassle to taking the deduction is to make sure you have the documentation to back it up. This can become complicated because your insurance may pick up some of those medical bills. Only the uncovered portion is deductible. Typically insurers send an explanation of benefits showing how much was charged by the medical provider, how much the insurer paid, and the amount you must pay. Keep that along with a receipt, bank or credit-card statement showing you paid that out-of-pocket amount. If you have a regular accountant, contact him or her after the medical event. Your accountant can help plan for the next tax season and advise what documents to send. If you do your taxes yourself you may want to seek out an accountant for a midyear consultation on how your medical expenses may affect your taxes. Phillips said: 'Don't leave it to chance." Write to editors@
Yahoo
3 days ago
- Health
- Yahoo
A Health Crisis Cost You a Bundle. How to Claw It Back.
Americans undergoing a major medical event or relying on assisted care at home or in a facility should put the deduction on their radar, tax experts say. 'Make sure you've got proof of payment for any out-of-pocket cost, everything to support that deduction,' said Henry Grzes, lead manager for tax practice and ethics with the American Institute of CPAs. What Is the Medical Tax Deduction?
