Last-Minute Tax Filing? Remember to Deduct Your Medicare Costs
We’re less than a week away from Tax Day, which is April 18 this year. For many seniors doing their taxes on their own, when it comes to deductions for Medicare and other medical expenses, they’re often left in the dark. So, for those seniors doing some last-minute filing and wondering whether their Medicare and other healthcare costs can be deducted, the answer is yes!
Medicare Parts B and D, which cover preventative services and prescription drugs, respectively, come at a cost for seniors. But it’s more than just premiums; in addition, seniors must allocate for the costs of copays and deductibles. So what amount of this cost can be deducted? The short answer is that most of it can be deducted (with a few exceptions)
The premiums for Medicare Part B and Part D are indeed tax deductible, as well as other out-of-pocket Medicare costs such as copays, prescription drug payments, and other expenses. However, it’s important to note that beneficiaries may only deduct expenses that exceed a certain portion of their income, so these deductions may not be an option to seniors who earned too much in 2016 or didn’t spend enough.
Here’s how it works: taxpayers may deduct medical expenses that surpass 10 percent of their adjusted gross income (AGI); however, for those aged 65 or older, it’s 7.5 percent of their AGI. Again, for seniors, medical costs may include (but are not limited to) Medicare expenses, copays, prescription drugs. So, a beneficiary making $40,000 in 2016 may deduct any Medicare premiums and expenses that exceed $3,000.
What exactly can seniors claim as medical expenses? Besides Medicare premiums and other health care costs discussed above, seniors may deduct the cost of medical services not covered by Medicare, such as dental and vision treatment and nursing home care. There are also several other expenses eligible for deduction that are often overlooked, like the transportation costs to and from medical treatments or money spent to alter a home for those seniors “aging in-place.”
As much as it’s important to include these other medical expenses when calculating deductions, David Levi, a tax and financial services firm senior advis r, believes it’s most important to remember to add premiums. “For instance,” Levi notes, “if you have your Medicare Part B and Part D premiums taken out of your Social Security benefit, remember to include them as part of your medical expenses.”
While Uncle Sam is fairly accommodating to seniors when it comes to medical deductions, there is one Medicare and health care-related expense beneficiaries can’t deduct–the late enrollment penalty for Part B or Part D. Those Medicare beneficiaries who failed to sign up during their initial enrollment period will not be able to deduct the additional costs incurred from the late enrollment penalty.
When filing taxes for you or your loved one, remember to keep these deductions in mind. Healthcare costs are the biggest expense Medicare beneficiaries face, so it’s important to deduct all eligible medical costs to help seniors soften the blow.
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