I'm not nearly as cheery as my smiley face socks in the above photo, but at least I'm recovering from oral surgery at home.
The downsides are some pain and (for me, but not the hubby!) not talking very much. There are some pluses, though: ice cream and milkshakes for every meal!
Yesterday's procedure also means I'll have more medical expenses to deduct on our 2018 tax return.
Yep, we're one of those few people who will be itemizing deductions under the Tax Cuts and Jobs Act (TCJA), primarily because of our medical situation the last couple of years. We will be able to reach a larger deductible amount than even the new almost doubled TCJA standard deduction amounts.
That's $24,000 for a jointly filing married couple in 2018. If you're a single taxpayer, the new increased standard deduction is $12,000.
The big deductible expense for us, due to employment changes, is the cost of our medical insurance.
No deducting workplace insurance premiums: Millions of folks don't think about deducting their health insurance premiums when they get that coverage through work.
This is because in many — actually most — cases, company-provided health care is a tax-free workplace fringe benefit for employees.
Yes, you do have a chunk of money taken out of your check each pay period for your health care. And it seems to increase each year.
But typically, these premiums you pay and see listed on your pay stubs are taken out of your paycheck before your income taxes are calculated. If you don't know whether you pay pre-tax or after-tax for your health care, ask your human resources or benefits department.
When your premiums are paid with pre-tax dollars, that means they already are income-tax-free. So you can't double dip, that is, use that tax benefit to claim another tax benefit.
Subsidized coverage not deductible either: Similarly, even if you pay premiums out of your own pocket, such as purchasing a policy through the Affordable Care Act (ACA), or Obamacare as it's popularly known, that full cost isn't likely deductible.
If you get a subsidy — that's the premium tax credit (PTC) — to help you meet your ACA policy's cost, you can't deduct the amount that's also covered by the credit.
However, any of the policy amount that you pay in excess of the PTC could be tax deductible.
If things work as planned with the PTC, though, that shouldn't leave you with much medical insurance costs to be counted as an itemized deduction.
When medical insurance is deductible: There are, however, folks who are in the same situation as the hubby and me and are able to write off a large amount of health insurance premiums payments.
This typically is the case for self-employed workers.
When your work for yourself and are not eligible for employer-sponsored medical coverage through a spouse's job, you may be eligible to write-off your health insurance premiums on your taxes.
These premiums, however, can't produce a tax loss for your business. You cannot deduct more in health insurance premiums than you earned.
If you are an employee and your company doesn't provide health care as a benefit, the coverage you buy totally on your own generally is tax deductible.
In these cases, you are paying for your policy with after-tax dollars, either by purchasing the policy directly from an insurance company or via a health insurance exchange. Deduct those payments!
Other tax-deductible policies: Also, a portion of a long-term care (LTC) insurance policy that you buy is tax deductible.
Just how much of your LTC premiums you can claim on Schedule A are based on your age and are adjusted annually for inflation. For 2018, the deductible amounts by age range are:
- $420 if you're 40 or younger
- $780 if you're age 41 to 50
- $1,560 if you're age 51 to 60
- $4,160 if you're age 61 to 70
- $5,200 if you're age 71 or older
Also, some Medicare plans, notably Part B and Part D of the government medical benefits program, are tax deductible.
Crossing the tax deductibilty threshold: If you find you can deduct your health care policy premiums, don't get too tax happy just yet.
Determining that you can indeed deduct your medical insurance premiums is just the first step. Now you have to run the numbers.
Your deductible medical costs must be more than your standard deduction amount noted earlier. But not all your medical expenses count in pushing you past the standard numbers.
You can only claim a portion of your qualified medical expenses that exceed a portion of your income.
The good news for folks who are considering itemized medical expenses for the 2018 tax year, the threshold remains at 7.5 percent of your adjusted gross income (AGI). The cap which your medical deductions must excess under the TCJA in tax years 2019-2025 is 10 percent of AGI, making your health-related expenses that much more difficult to claim.
The bad news is that only your medical claims that are more than 7.5 percent of your AGI can be claimed.
Say, for example, your AGI is $50,000. You must have enough health-related costs that total more than $3,750. If your medical expenses come to $4,000 you can only claim $250.
With a $12,000 standard deduction, that's not going to make itemizing worthwhile unless all your other Schedule A expenses are much, much larger.
Bulking up your medical deductions: There are ways to get your medical costs to a worthwhile deduction level.
My earlier post on ways to maximize the many medical expenses that are still tax deductible under the TCJA has some ideas.
Check it out now while you have time to make all your necessary medical appointments.
And I can assure you that the hubby, after all these years of living with klutzy me, made sure I put them on correctly.
As the photo to the left indicates, there's no top or bottom. The sticky imprints and smiley faces to help ensure wobbly patients don't fall are on both sides. Guess there are lots of folks out there like me who want to see the socks and have them work, too!
You also might find these items of interest:
- Items to add to your end-of-year FSA shopping list
- High-deductible health plan, HSA 2019 inflation amounts
- Medical tax provisions affected in 2018 by inflation and the new tax laws