Tax

If you, your spouse or dependents had significant medical or dental costs in 2015, you may be able to deduct those expenses when you file your tax return. Here are eight things you should know about medical and dental expenses and other benefits.

1. You must itemize. You can only claim medical expenses that you paid for in 2015, and only if you itemize on Schedule A on Form 1040. If you take the standard deduction, you can’t claim these expenses.

2. Deduction is limited. You can deduct all the qualified medical costs that you paid for during the year. However, you can only deduct the amount that is more than 10 percent of your adjusted gross income. The AGI threshold is still 7.5 percent of your AGI if you or your spouse is age 65 or older. This exception will apply through December 31, 2016.

3. Expenses must have been paid in 2015. You can include medical and dental expenses you paid during the year, regardless of when the services were provided. Be sure to save your receipts and keep good records to substantiate your expenses.

4. You can’t deduct reimbursed expenses. Your total medical expenses for the year must be reduced by any reimbursement. Costs reimbursed by insurance or other sources do not qualify for a deduction. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. Whose expenses qualify. You may include qualified medical expenses you pay for yourself, your spouse and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement, or those with a qualifying relative who is not your child.

6. Types of expenses that qualify. You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and certain long-term care insurance in your expenses. And, you can also include lactation supplies.

7. Transportation costs may qualify. You may deduct transportation costs primarily for and essential to medical care that qualifies as a medical expense, including fares for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 23 cents per mile for 2015.

8. No double benefit. You can’t claim a tax deduction for medical and dental expenses you paid for with funds from your Health Savings Accounts (HAS) or Flexible Spending Arrangements (FSA). Amounts paid with funds from those plans are usually tax-free. This rule prevents two tax benefits for the same expense.

Please call if you need help figuring out what qualifies as a medical or dental expense.

• By Leon Clinton
• June 23, 2015

If you have enrolled for health coverage through the Health Insurance Marketplace and receive advance payments of the premium tax credit in 2015, it is important that you report changes in circumstances, such as changes in your income or family size, to your Marketplace.

Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Marketplace. Having at least some of your credit paid in advance directly to your insurance company will reduce the out-of-pocket cost of the health insurance premiums you’ll pay each month.

However, it is important to notify the Marketplace about changes in circumstances to allow the Marketplace to adjust your advance payment amount. This adjustment will decrease the likelihood of a significant difference between your advance credit payments and your actual premium tax credit. Changes in circumstances that you should report to the Marketplace include, but are not limited to:

• An increase or decrease in your income
• Marriage or divorce
• The birth or adoption of a child
• Starting a job with health insurance
• Gaining or losing your eligibility for other health care coverage
• Changing your residence

For the full list of changes you should report, visit HealthCare.gov or call the office. If you report changes in your income or family size to the Marketplace when they happen in 2015, the advance payments will more closely match the credit amount on your 2015 federal tax return. This will help you avoid getting a smaller refund than you expected or even owing money that you did not expect to owe.

Please contact the office if you have any questions about how the healthcare premium affects you and your taxes.

• By Leon Clinton
• June 20, 2015

You may be tempted to forget about your taxes once you’ve filed your tax return, but did you know that if you start your tax planning now, you may be able to avoid a tax surprise when you file next year?

That’s right. Now is a good time to set up a system so you can keep your tax records safe and easy to find. Here are six tips to give you a leg up on next year’s taxes:

1. Take action when life changes occur. Some life events such as a change in marital status or the birth of a child can change the amount of tax you pay. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. Call if you need help filling out the form.

2. Report changes in circumstances to the Health Insurance Marketplace. If you enroll in insurance coverage through the Health Insurance Marketplace in 2015, you should report changes in circumstances to the Marketplace when they happen. Reporting events such as changes in your income or family size helps you avoid getting too much or too little financial assistance in advance.

3. Keep tax records safe. Place your 2014 tax return and supporting records and documents in a safe place. If you ever need your tax return or records, it will be easy for you to get them. For example, you may need a copy of your tax return if you apply for a home loan or financial aid. You can also use your tax return as a guide when you do your taxes next year.

4. Stay organized. Make tax time easier on everyone by having your family place tax records in the same place during the year. That way you won’t have to search for misplaced records when you file your return next year.

5. Choose your tax preparer wisely. If you want to hire a tax preparer to help you with tax planning, start your search now. If you already have a tax preparer, give him or her a call and find out which tax planning strategies you can use this year that save you money on your 2015 tax return.

6. Consider itemizing. If you claim a standard deduction on your tax return, you may be able to lower your taxes if you itemize deductions instead. A donation to charity could mean some tax savings. See the instructions for Schedule A, Itemized Deductions, for a list of deductions.

Planning now can pay off with savings at tax time next year. Call today and get a jump start on next year’s taxes.

• By Leon Clinton
• June 17, 2015