Tax Tip: Add on Medical Expenses for a Nondependent

By Ken Berry
 
This is the eighth article in our series of tax return tips for 2011 returns. 
 
It's often difficult for taxpayers to qualify for medical expense deductions – but not impossible. Although the annual threshold is daunting, clients often overlook or ignore deductible expenses that can help pad their total. A prime example: medical expenses paid on behalf of a relative who isn't a tax dependent.
 
Let's start with this basic premise. On 2011 returns, a taxpayer can deduct only those qualified medical and dental expenses in excess of 7.5 percent of adjusted gross income (AGI). For instance, if the taxpayer has an AGI of $100,000 and incurred $7,000 of unreimbursed expenses during the year, he or she gets no medical deduction. Even worse, the threshold is scheduled to rise to 10 percent of AGI in 2013.
 
Of course, tax filers can count the medical and dental expenses paid on behalf of a spouse or dependents, like young children, in their grand total. What about an elderly relative a taxpayer helps support?
 
On 2011 returns, a taxpayer can deduct only those qualified medical and dental expenses in excess of 7.5 percent of AGI. Even worse, the threshold is scheduled to rise to 10 percent in 2013.
Usually, you can claim a dependency exemption for a relative only if you provide more than half of the relative's annual support and his or her gross income doesn't exceed the personal exemption amount ($3,700 for 2011). But there's a slight wrinkle in these rules for "medical dependents." The IRS says in Pub. 502, Medical and Dental Expenses, that you can include medical expenses paid for the relative if you pass the half-support test – even if you can't claim the relative as a dependent because of the gross income test.
 
Example: Suppose a client's elderly mother received $10,000 in Social Security benefits and $4,500 of taxable investment income in 2011. The client gave mom $1,000 a month for rent and also paid $3,000 of her out-of-pocket medical bills. So the client provided more than half of her support ($15,000 versus $14,500). But the client still can't claim mom as a dependent for 2011 because her taxable income exceeded the $3,700 limit.
 
In this case, your client can add the $3,000 paid for mom's medical bills to his or her other qualified medical and dental expenses. The extra amount might be just what the client needs to surpass the 7.5 percent of AGI threshold. And, if the client already qualified for a medical deduction in 2011, the entire annual medical payment for mom is deductible.  


See the whole series of Ken Berry's tax tips for the 2012 filing season
  1. How to Secure an 'Extra' Dependency Exemption
  2. Choose the 'Biggest and Best' State Tax Deduction
  3. Lock in Mortgage Interest Deductions for Points
  4. Generate Energy Credits for Clients
  5. Dish Out Tax Rewards to Charitable Volunteers
  6. A Party at Home? That's (Deductible) Entertainment!
  7. Spell Out Tax Rules for Business Education
  8. Add on Medical Expenses for a Nondependent
  9. How Do You Spell Tax Relief? C-a-s-u-a-l-t-y Loss
  10. Expand the Reach of Dependent Care Credit

 
Related articles:

You may like these other stories...

Smaller companies slow to adopt new rules for internal controlsSmaller companies are not keeping up with larger rivals in adopting new internal controls as the Dec. 15 deadline approaches, John Kester of the Wall Street...
Ryan to chair tax panel, a possible 2016 platformHouse Republican leaders chose Rep. Paul Ryan (R-WI) on Tuesday to head the powerful House Ways and Means Committee for the next two years, giving him a high-profile platform...
For the most part, when you donate monetary gifts to charity, whether it’s in cash, by check or credit card charge, you can deduct the full amount on your tax return as long as you meet IRS substantiation requirements...

Already a member? log in here.

Editor's Choice

Upcoming CPE Webinars

Nov 24This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.
Dec 3The materials discuss the concepts and principles in the AICPA’s new special purpose framework.
Dec 9A key component to improving your firm’s workflow efficiency while enhancing your profitability at the same time is how you leverage emerging technologies.
Dec 9Kristen Rampe will cover how to diffuse the tension in challenging situations in this one-hour webinar.