Happy New Year, everyone! It is that time of year when we are busy getting our tax paperwork in order. Before filing your taxes, don’t miss out on deductions related to medical expenses and other costs that come out of your wallet, especially if you care for a family member throughout the year.
Make sure to check if it is more beneficial to itemize your taxes instead of taking the standard deduction. An estimated one-third of U.S. taxpayers, or about 45 million people, itemize their taxes instead of taking IRS’ standard deduction. See if you can get a break on your taxes, with these 10 tax deductions.
Nearly 100 medical costs related to the diagnosis, treatment, cure or prevention of disease or costs for treating any part of the body can be deducted. Those include equipment, services and supplies, including glasses, eye surgery, acupuncture and prescriptions. Even artificial limbs, bandages, hearing aids and wigs are accepted medical expenses. For others, see IRS’ Publication 502. The medical and dental costs must total more than 7.5 percent of your adjusted gross income to be deducted.
Long-term health care costs
An often-missed expense is the amount paid for long-term care services and long-term care insurance. The latter is a more limited deduction, depending on age. Rehabilitation, therapeutic, preventative and personal care services are among those that qualify as long-term care services, if a family member is chronically ill and if it’s part of a plan set by a health care practitioner.
Someone is considered chronically ill if they can’t perform at least two activities of daily living, such as eating, toileting, bathing and dressing, without substantial assistance from someone else.
From weekly doctor’s appointments to out-of-town visits with a specialist or for a procedure, the miles you log for your medical needs can be deducted. You will need to keep a log for documentation. The reimbursement rate will be about 19 cents a mile for 2012. If you’re staying overnight for a medical purpose, deduct $50 per night, for each person, for lodging.
Go ahead and smile — dental expenses are among the medical costs that some people ignore at tax time. This includes dentures and artificial teeth.
Home improvements for aging adults
Investing in ramps for a wheelchair-bound individual, as well as handrails and grab bars in the bathroom, or a stepless shower, can be part of a deduction as long as it doesn’t add value to the house.
The IRS says that the cost of the improvement is reduced by the increase in your property value. Other changes, such as widening doorways and hallways, lowering kitchen cabinets and installing lifts, also typically do not add value to houses.
Energy-saving home improvements
Any energy-saving changes are eligible for a credit. For more traditional items such as insulation and windows, it’s 10 percent of the cost, up to a maximum of $500. For alternative energy equipment, such as a solar hot water heater, the credit is up to 30 percent of the cost. Find more details from the EnergyStar program at www.energystar.gov.
Anyone filing for these credits will need to wait until the end of February, as the tax law was not enacted in time for the forms and software to be updated.
If you are paying interest on your home loans, construction loans or home equity lines of credit, it’s deductible. There are some limitations, though, so you need to discuss with your accountant.
State and local sales tax
This is an excellent idea if you live in a state that doesn’t have income tax, which New York is not. If you do, you’ll need to make a choice: Deduct state and local sales taxes, or state and local income taxes. You may find that the best financial benefit is to stick with the income tax deduction.
Estate tax on an inherited IRA
This is not as easy as deducting medical expenses or charitable contributions, but is worth checking out. If you inherited an IRA, you could take an deduction for the federal estate tax paid on IRA income.
Of course, you may know to estimate the value of items you donate to charity. But you also can include other out-of-pocket costs related to volunteering. If you bought ingredients to make meals for the homeless or elderly, or if you drove a personal vehicle while volunteering or assisting a charity, those and other costs can be deducted. If you are not comfortable preparing your return, or have questions, there are several AARP Tax Counseling for the Elderly sites to help you.
The Schoharie County Office for the Aging is partnering with AARP to provide free tax assistance. Tax prep will be done on Mondays and Thursdays through April. Appointments are necessary as there are some limited returns we cannot prepare. Please call (518) 295-2001 for question or an appointment.
Nancy Dingee is director of the Schoharie County Office for the Aging. ‘Senior Scene’ columns can be found at www.thedailystar.com/seniorscene.