Changing tax laws, increasing insurance premiums and copayments, and other factors combine to make it more and more challenging to pay your medical expenses. It’s helpful to know when and to what ex...
Health insurance premiums and other medical costs are on the rise. If medical insurance does not cover all of your out-of-pocket costs, tax rules can help you minimize your financial exposure. However...
Understanding taxes is complicated, more so by the fact tax pros and the IRS often use abbreviations to denote various tax terms. To better utilize tax breaks and opportunities, it’s helpful to know...
In June, the U.S. Supreme Court decided that the Patient Protection and Affordable Care Act of 2010 was constitutional. The basis for its decision: that the penalty for not carrying health coverage st...
If you have a health savings account (HSA), it is up to you to retain proof that withdrawals from the account were for qualified medical expenses. Keep the following records along with the copy of you...
Health savings accounts (HSAs) are IRA-like accounts that, along with a high-deductible health plan (HDHP), provide affordable health coverage. Taxwise, HSAs offer a number of attractive features....
The definition of a qualified medical expense applies for several purposes. It controls the amount that can be deducted as an itemized medical deduction. It also determines whether distributions from ...
Long-term care is the type of care needed by some elderly and chronically ill individuals, such as Alzheimer's patients and seniors who require assistance with daily activities (e.g., bathing, dressin...
Advanced age and/or chronic illness may require ongoing daily treatment. Payments for nursing homes, convalescent homes, and sanitariums may be treated as deductible medical expenses. The deduction ge...
In 1965, Congress introduced a federally sponsored health insurance program as part of the Social Security Act. This program, called Medicare, is designed primarily to provide those age 65 and older w...
If you receive any federal COBRA subsidy in 2011, it is tax free to you only if your modified adjusted gross income (MAGI) does not exceed a set amount ($145,000 for singles or $290,000 for joint file...
Under federal law, if you work for a company that regularly employs 20 or more workers and has group health insurance, you are entitled to continue under the employer's group plan even if you leave em...
Only account distributions used to pay qualified medical expenses can be withdrawn from an HSA on a tax-free basis. Qualified medical expenses include:Any expense that could be claimed as an item...
To contribute to an HSA, you must meet 2 conditions:You are not covered by Medicare. HSAs are designed to cover individuals who do not qualify for Medicare. Therefore, you are ineligible for an H...
Individuals who are covered by health insurance policies with high deductibles may be eligible to contribute money to a special savings account, called a health savings account (HSA). About 49.9 milli...
Companies are increasingly forced to make employees pay for some or all of their medical expenses. But they can assist them by creating special arrangements, called flexible spending arrangements (FSA...
If you have a long-term care policy and collect benefits because of your medical need, some or all of the payments to you are tax free. The exclusion applies only to qualified long-term care services ...
Individuals who are suffering from chronic conditions such as Alzheimer's disease or are merely elderly and incapable of self-care (such as feeding and bathing themselves) require long-term care, eith...
Self-employed individuals and shareholders owning more than 2% of S corporations can deduct all of their health insurance directly from gross income. Thus, the write-off can be taken even if other ded...
Not every expense of a medical nature is deductible. Here is a listing of instances where no deduction was allowed by the IRS:Antiseptic diaper services Bottled water purchased to avoid the cit...
- For purposes of the 3.8% additional Medicare tax on net investment income in 2013, how does this relate to rental income?
- Can I make a direct transfer of my IRA to my church and qualify for tax-free treatment (up to $100,000)? I’m 72 years old.
- I sold my residence at a loss. How do I report this on my tax return?
- I traveled to Africa on a mission trip with my church. I paid for the airfare. Can I deduct it?
Traditional IRAs
The Employee Retirement Income Security Act of 1974 created individual retirement accounts (IRAs) to enable taxpayers to save for their own retirement largely because company pensions could no longer be relied upon for retirement income. With an IRA, the government effectively contributes to your retirement savings by permitting a tax deduction for contributions if certain conditions are met. The tax savings are the government’s contribution. For example, if you are in the 33 percent tax bracket, the government contributes almost one-third of your contributions to a traditional (deductible) IRA-your tax savings from the total contribution amount; you only have to come up with about two-thirds of the contribution.
If you work as an employee or have net earnings from self-employment, you can contribute to an IRA. The contribution limit for 2009 is $5,000, or $6,000 if you are age 50 or older by the end of 2009, as long as you earn at least this dollar amount.
If you are single, under age 50, and earn at least $5,000, you can make a full contribution. If you work part-time and earn only $2,000, your contribution is limited to $2,000.
If you have a spouse who does not work for compensation, you can contribute to an IRA for your spouse based on your own earnings. The same dollar limit of $5,000 (or $6,000 if age 50 by the end of 2009) applies to a spousal IRA. This means that if you have sufficient earnings and both you and your spouse are under age 50, you can contribute up to $10,000 ($5,000 for yourself and $5,000 for your spouse) for 2009.
If you do not participate in another qualified retirement plan, such as a 401(k) plan, or if you do participate but your income is below a set amount, you can deduct your contributions. The deduction is claimed as an adjustment to gross income; you claim it regardless of whether you itemize your other deductions.
Earnings on IRA contributions build up on a tax-deferred basis (no tax is owed annually on the earnings of an IRA). However, you are required to take certain withdrawals from the IRA starting at age 70û. If you fail to take these required amounts (called required minimum distributions, which are not discussed further in this book), you may be subject to a whopping 50 percent penalty of the amount you should have taken.
23.8 million individuals who itemized deductions reported $58.7 billion in deductions for noncash charitable contributions in 2007 (the most recent year for statistics). The most common items donated: clothing and household items, corporate stock, and land.
Source: Statistics of Income Bulletin, Spring 2010
View all factoids
