Seniors face distinctive issues concerning earnings taxes

My 90-year-old mom’s well being bought to the purpose the place she was now not ambulatory and couldn’t deal with herself. An orthopedic surgeon informed her she would want assisted residing. If a physician declares it, is the price of assisted residing deductible on an earnings tax return? S.P., snail mail

The above state of affairs and query lead us to level out among the distinctive points that may problem taxpayers as they age. This week’s column will give attention to earnings tax ramifications for seniors and, in some conditions, their youngsters.

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Here is a guidelines of some earnings tax gadgets seniors (and their youngsters) needs to be contemplating:

1. Do I nonetheless must file federal or state earnings tax returns after I retire? (Quick Reply is YES, as a result of there are a number of provisions that particularly pertain to taxpayers who’re at least 65 years previous).

2. Can I nonetheless contribute to an IRA? (Quick Reply is YES).

3. Do the contribution quantities and deductions change as I age? (Quick Reply is try Publication 554, Tax Information for Seniors).

4. Does it make sense to itemize deductions?

5. Medical prices — which of those funds are deductible?

6. Can I take my father or mother as a depending on my tax return?

7. Any particular tax credit accessible for the aged and/or their youngsters? (Quick reply is YES and Publication 554 cited above is useful).

8. If I’m now not working and no payroll taxes are being withheld, do I must make quarterly estimated funds? (Quick reply is YES).

As a result of every of the above questions may fill a number of of our weekly columns, we’ll tackle the gadgets the place a “Quick Reply” just isn’t supplied.

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SP’s mom’s medical bills will come into play provided that Mother’s itemized deductions (Word: along with medical, they usually embrace state earnings and property taxes, charitable contributions, and mortgage curiosity) are greater than her customary deduction (i.e., $14,700 for Mother by herself; $28,700 if Mother and Dad are submitting collectively in 2022, assuming each are over 65). Mother’s medical bills should be greater than 7.5% of her Adjusted Gross Earnings (AGI). It is seemingly that assisted residing bills will exceed the 7.5% threshold, whereas IRS Publication 502, Medical and Dental Bills offers a reasonably exhaustive listing of things (together with capital expenditure) eligible for itemized deduction remedy.

The IRS requires two assessments to be handed for “certified long-term care companies” (like assisted residing) to be included in medical bills. Particularly: The bills are (1) required by a “chronically in poor health particular person” and (2) supplied pursuant to a plan of care prescribed by a licensed well being care practitioner.

To qualify as “chronically in poor health” (utilizing the earlier 12 months as a time horizon), a licensed well being care practitioner should have licensed (in writing) that the person both is unable to carry out a minimum of two actions of day by day residing (ADL) with out substantial help (Word: ADL are consuming, toileting, transferring, bathing, dressing and continence) OR the person requires substantial supervision attributable to extreme cognitive impairment.

How about taking a father or mother as a dependent? There are guidelines for each the father or mother (i.e., usually should be single, cross citizenship and relational assessments, and have gross taxable earnings below $4,400 in 2022) and the baby (i.e., should present over half of their father or mother’s assist for the 12 months). The assist whole consists of all cash spent on assist, together with meals stamps, housing help and different authorities help. If the father or mother is mentally incapable of caring for themselves, the kid could also be eligible for a dependent care credit score. Particulars can be found in Publication 503, Youngster and Dependent Care Bills.

Rick Klee served because the tax director on the College of Notre Dame from 1998 by means of August 2019. A retired CPA, Klee is a graduate of Notre Dame. You possibly can contact him at rklee@nd.edu.

Ken Milani is a professor of accountancy at Notre Dame the place he served as the college coordinator of the Notre Dame Tax Help Program. Contact him at milani.1@nd.edu.

E-mail inquiries to both.