Whether you have a chronic medical condition or a large family with routine medical expenses, you may have costs that are not reimbursed by your insurance provider. If this is the case, you may be looking to deduct some of these medical expenses from your taxes this year. In 2019 there are changes to the threshold amount that qualifies for deduction, and you may not get back what you expect. It’s important to keep good records and make sure you know what counts and what doesn’t.

Medical Expenses That are Tax Deductible?

There is quite a bit that is tax deductible when it comes to medical expenses, but you must keep receipts, reports, and forms that prove the patient cost. You can include all of the following when preparing your tax deductions for 2019 taxes:

  • Travel for medical care, including mileage on your car, bus fare, and parking fees
  • Preventative care
  • Medical treatment
  • Surgeries and procedures
  • Dental and vision
  • Phycologist/Psychiatrist fees
  • Prescriptions for drugs and devices
  • Glasses and contacts
  • Dental prosthetics
  • Hearing aids

Non-Qualifying Medical Expenses

If you are reimbursed for any medical expense by your insurance provider or employer, it cannot be deducted from your taxes. Other medical expenses like that for cosmetic procedures and care is not deductible. Additionally, non-prescription drugs or purchases for general health are not deductible. You cannot deduct expenses for toothpaste, gym memberships, vitamins, diet foods, nicotine products, or any qualifying medical expenses paid in a year prior to the tax year.

How Much Can You Deduct?

Though the IRS allowed deductions on all medical expenses that exceeded 7.5% of adjusted gross income in 2017 and 2018, the amount was raised for the 2019 tax year. This year, when you file your taxes, you are only allowed to deduct medical expenses that exceed 10% of your adjust gross income. That means that if your adjust gross income is $41,000 and your medical expenses for yourself and dependents is $7,000 for the year, you can easily find the amount that is deductible by using the following formula to find 10% of your adjust gross income:

AGI x 0.10 = threshold for medical expenses for 2019 tax year

Enter the amounts as follows:

$41,000 x 0.10 = $4,100

Following this formula we find that in this scenario, only costs that exceed $4,100 are tax deductible. Since the total costs were $7,000, we know that $2,900 is tax deductible. If instead of $7,000, your medical expenses were a mere $2,000 for the year, you would not be able to deduct these expenses from your 2019 tax total because the cost does not reach the threshold.

Claiming the Deduction

In order to claim a medical expense deduction on your taxes, you must itemize your deductions. This can be tedious work and will require very detailed record-keeping on your part throughout the year. If you’re unsure how to properly complete your tax form, it’s important to seek out a professional who can help you get the most out of your tax return. Make sure you tell your tax preparer up front that you have medical expenses you’d like to deduct so that they can advise you correctly.

Tis the season! Pumpkins, gourds, and turkeys are a thing of the past! Now is the time for garland, twinkle lights, packed malls, family travel and…germs. No matter where you are or what you’re doing, you are going to come into contact with more people this Holiday season than usual, and right in the middle of flu season. It’s important to take precautions wherever you an. You cannot control the person next to you on the train or the previous patron in the taxi or Uber, but you can control how many germs you take with you throughout your day.

Clean Hands to Stay Healthy

According to the Centers for Disease Control and Prevention, handwashing is one of the best ways to protect yourself and your family from getting sick—during flu seasons and all seasons. Though you should practice good handwashing and hygiene habits all the time for optimum health, there are specific times that people should take special care to clean their hands.

At mealtime it is important to wash hands before, during, and after meal prep. If you aren’t cooking the food, it’s still important to wash hands before eating food—no matter what you were doing before eating. We sometimes think only children with muddy hands need wash hands before eating, but you may be collecting germs on your hands from your job, your books, computer, phone, and more. Wash those germs from your hands before eating.

When providing care to sick family members, for your job, or as a parent, it’s important to wash your hands before and after care. This means hands should be washed before and after touching another person, cleaning a wound or cut, changing diapers, wiping faces, and any other interaction with a person in your care.

When caring for yourself it’s important to wash your hands. After using the toilet, blowing your nose, coughing, or sneezing. You should even wash your hands regularly during heavy cleaning in your home, including laundry, bathrooms, countertops, and taking out the trash.

After touching animals you should wash your hands. Whether you’re bathing them, petting them, feeding them, or cleaning up after them, you should wash your hands. All animals carry germs just as humans do, except animals have hair that can hold more filth than skin or human hair can. You should also clean your hands after handling pet food and pet treats.

While traveling it’s important to maintain good handwashing and hygiene habits. It is common for to experience illness during and after a trip because germs are spread during travel when people are busier than usual and may not take the time to wash hands. Keep hand-sanitizer on hand for these times. Take precaution when on airplanes, in other enclosed spaces, and while staying in hotels and other people’s homes.

Proper Handwashing

When it comes to handwashing technique, method matters. The CDC recommends a five-step method that includes: (1) wetting the hands with hot or cold water, (2) lathering soap over the hands, between fingers, and under nails, (3) scrubbing the hands for at least 20 seconds, (4) rinsing the hands well under running water, and (5) drying hands using a clean towel or air dryer. If you’re unsure about how long to scrub the hands, count to 20 or sing the “Happy Birthday” song. Teach your kids one of these 5 hand washing songs so that they can learn good handwashing habits too.

 

 

Saving for the Future

Health Savings Accounts (HSAs) are accounts that are funded by pre-tax income and these funds remain untaxed so long as they are used for qualified medical expenses. HSAs are generally overseen by an employer or if it is an individual HSA, it is overseen by a bank, credit union, or insurance company. Anyone can open a health savings account if their medical insurance plan is a high-deductible health plan. However, when you’re enrolled in Medicare, your options change substantially because Medicare is considered insurance and is not a high-deductible health plan. Many people who age into Medicare eligibility actually have an HSA. What do you do with your HSA once you can enroll in Medicare? What is the best legal option for you, and how will it affect your finances? These are important questions to ask as you plan your retirement or help your loved ones plan for theirs.

Medicare and IRS Compliance

You are unable to open an HSA or contribute money to an HSA if you have any other insurance other than a high-deductible health plan. Though you can no longer contribute to your HSA with Medicare, you can still make withdrawals for qualified medical expenses. It can be confusing for consumers to navigate the rules because Medicare is overseen by the Department of Health and Human Services and HSAs are overseen by the Department of Treasury. Here are some points to consider:

  • Some individuals decide to put off Medicare enrollment in order to continue work and continue before tax contributions to their HSA.
  • An individual is still able to open a HSA if eligible, despite a spouse enrolling in Medicare.
  • HSA funds can be used to cover copayments, premiums, prescriptions, and more despite being enrolled in Medicare.
  • It is completely legal to use HSA funds to pay for the medical expenses of your spouse and any tax dependents even if they aren’t themselves HSA-eligible.

Deferring Medicare Enrollment

There is no real reason to defer Medicare enrollment when eligible. Many decide to defer enrollment if they are still employed and can continue making contributions to their HSA. However, waiting to enroll in Medicare can result in steep penalties. The late enrollment penalty for Medicare Part B alone is 10 % for each year after your 65th birthday and continues for the rest of your life. Find out more about Medicare late enrollment penalties here.

Planning for Your Future Today

You can reduce your medical costs by enrolling in a high deductible health plan either through an employer or individually. This insurance plan comes with a lower monthly premium but a higher deductible. Talk with your employer or banker about opening a health savings account to help you pay your deductible by using tax-free HSA funds. When prioritizing your health, your medical needs will be minimal and the funds in your HSA will accumulate until you are a senior, at which point you can enroll in Medicare, stop contributing to your HSA, and use the funds for your Medicare premiums. Upon your death, your HSA funds will be liquidated and distributed to a beneficiary of your choice who will be able to use the funds for any purpose. This is the way that programs are designed for the consumer, and how you can best benefit from them.

 

 


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