Your Medical Expenses May Save You Money at Tax Time, But a Few Key Rules Apply

Due to the 10% AGI threshold for taxpayers less than 65 years old, explained Krystle Dean, CPA, a senior tax manager for WNDE, clients often are not able to take the available tax deduction for medical expenses.  For a taxpayer 65 or older, the AGI threshold is reduced to 7.5% through 2016, she continued, “so it is more common to see those clients receiving a tax deduction for their medical expenses.”

Here are some Tax Tips to help you determine if you can deduct medical and dental expenses on your tax return:

• Itemize. You can only claim your medical expenses on your taxes that you paid for in 2016, if you itemize deductions on your federal tax return.
• Income. Include all qualified medical costs that you paid for during the year, however, you only realize a tax benefit when your total amount is more than 10 percent of your adjusted gross income.
• Temporary Threshold for Age 65.  If you or your spouse is age 65 or older, then it’s 7.5 percent of your adjusted gross income. This exception applies through Dec. 31, 2016.
• Qualifying Expenses.  You can include most medical and dental costs that you paid for yourself, your spouse and your dependents including:
  • The costs of diagnosing, treating, easing or preventing disease.
  • The costs you pay for prescription drugs and insulin.
  • The costs you pay for insurance premiums for policies that cover medical care qualify.
  • Some long-term care insurance costs.

Some common examples of expenses that taxpayers can include in their medical expenses but they may not be aware of, Krystle noted, are acupuncture, chiropractic care, inpatient rehabilitation facilities, long-term care premiums (limited depending on age) and certain weight loss programs.  Some cosmetic surgeries, related to accident, disease or congenital abnormality, also can be deductible.  Krystle continued, “If there are certain treatments that your doctor recommends, it may be something that is a tax deduction, so please consult your CPA accountant.”
Costs reimbursed by insurance or other sources normally do not qualify for a deduction. For more examples of costs, you can and can not deduct, see IRS Publication 502, Medical and Dental Expenses. You can get it on IRS.gov/forms anytime.

• Travel Costs Count.  You may be able to deduct travel costs related to medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the  standard mileage rate for medical travel. The rate is 19 cents per mile for 2015.
• No Double Benefit.  You can’t claim a tax deduction for medical expenses paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.
• Use the Tool.  Use the Interactive Tax Assistant tool on IRS.gov to see if you can deduct your medical expenses. It can answer many of your questions on a wide range of tax topics including the health care law.

“Keep all records of income and deductions until the statute of limitations runs out,” Krystle said, “which is three years from the date taxpayers file their tax returns for federal and four years for California.”
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
Have more questions or looking to offset some of your filed taxes with medical and dental deductions? Contact a WNDE tax accountant and who can better assist you in maximizing your tax services to get the most savings possible.

Additional IRS Resources:

• Schedule A (Form 1040), Itemized Deductions
• Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

IRS YouTube Video:

• Medical and Dental Expenses – English | Spanish | ASL

IRS Podcasts:

• Medical and Dental Expenses – English | Spanish

Melissa Hou, CPA, MST, is a tax manager.   In this role, she works with clients in a wide variety of industries including distribution, manufacturing, sales, business and professional services, real estate and non-profit organizations.  She specializes in rental real estate, real estate development and real estate investment.  She joined the WNDE team in 2015.
Melissa was born in Taiwan and grew up in Los Angeles.  She is fluent in Mandarin Chinese and English.  She earned a Bachelor of Arts degree in Business Economics at UCLA, and a Master of Taxation at Golden Gate University.  Accounting was not her first career choice, she said, but she agreed to try it out for three months upon her father’s insistence.  Melissa remarked, “He was right.  I absolutely loved how challenging and dynamic accounting is.  There is an endless amount of learning and growth available.”
Her areas of expertise include: partnerships, s-corporations, c-corporations, individuals, and trusts; planning, quarterly and year-end tax provisions, research; business property tax, sales tax; non-profit organization tax compliance; and Quickbooks.  She is a member of the AICPA and CalCPA.
Interests outside of the office include spending time with her boyfriend and dog, hiking, attending concerts and traveling both domestically and internationally.

WNDE is pleased to announce the hiring of three new managers:  Usman Ilyas, David Moya and Rex Vollmer.  Usman is an audit manager, Rex a senior audit manager and David a senior tax manager.

Usman has 12 years of comprehensive experience in providing audit and advisory services to local governmentsand non-profit organizations.  He specializes in the preparation of comprehensive annual financial reports (CAFR), state controller’s reports and in conducting federal compliance audits in accordance with Uniform Guidance.  He is also experienced in providing audit and advisory services to local governments and non-profit organizations.

David works with privately held businesses, high net-worth individuals, trusts and estates.  His experience includes preparation and review of individual, partnership, corporate, trust, gift and estate tax returns. He has clients involved in various industries including manufacturing, distribution, professional and service-oriented businesses.  He has worked in the accounting field since 1990, including 10 years in Honolulu.

Rex has a broad range of auditing experience, and has audited companies in a wide range of industries.  Before coming to WNDE, Rex served as an audit director at a firm which performed audits of publicly traded companies.  His experience has allowed him to acquire technical expertise in handling complex financial reporting matters, including business combinations, complex debt and equity transactions and share-based compensation.  In addition to performing financial statement audits and reviews, he is also active in providing consulting services, including assessments on internal controls.
“We’re delighted to welcome these highly skilled individuals,” said Dave Doran, managing partner.  “They bring many outstanding talents to our professional team, and will enable us to better serve our clients.”