Tax Strategies for Medical Care Expenses

Everyone seems to be conscious about the high cost of healthcare. The excellent news is the fact that some basic tax strategies will help you decrease taxes to offset these significant costs. Here are some helpful tax strategies.

Take advantage of tax deductions for medical costs
The government allows tax payers to write off any medical expenses that go beyond 7.5 % of their adjusted gross income (AGI). That may appear like quite a lot, however the EBRI estimates that a 65-year-old couple who leave the workplace with out employer-sponsored health insurance coverage will require $216,000 to cover out-of-pocket medical expenses as long as they live to age 80.2 That is $14,400 per couple annually. In the event you and your spouse possess an AGI of $75,000 annually in retirement, 7.5 % of the AGI is $5,625. You’d nonetheless be able to deduct $8,775.

Most of the people do not realize this but expenses for your long-term-care insurance qualify like a health-related expense. As a result, proper tax strategies will have you considered these costs in the above permitted deductions for the medical costs. The allowable deductions for 2012 are as follows:

2012 Long-term Care Insurance Federal Tax Deductible Limits

 

Taxpayer’s Age At End of Tax Year – Deductible Limit
40 or less	$  350
More than 40 but not more than 50	$  660
More than 50 but not more than 60	$1,310
More than 60 but not more than 70	$3,500
More than 70	$4,370

 

According to the above table, a wife and husband both age sixty five may purchase long-term care insurance and deduct up to $7000 in their premium costs as a health-related expense. This type of tax strategy takes advantage of the government subsidizing your long-term-care costs as if you are in the 30% tax bracket, it is as if the government is paying 30% of your costs.

Utilize a high Deductible Health Savings Account

Until you sign-up for Medicare you are able to have a high-deductible health savings account (HSA). This kind of account offers substantial tax strategies opportunities.

If your employer provides a high-deductible medical insurance coverage, you may be able to generate pretax contributions, as if you would with a flexible-spending account. In the event you open the HSA on your own, your contributions will be deductible when you file your taxes, even if you do not itemize.

The tax deductible contribution limits for 2012 are $3100 for an and the limit for families increased is $6,250. The catch-up provision (additional contribution) for those age 55+ stays at $1000. In the event you do not use these funds for eligible health care expenses, you are able to treat the unused money as you would an IRA for retirement savings.

There you’ve two excellent tax strategies ideas to help subsidize your medical care expenses.