Did you know you could be responsible for your parents’ unpaid bills? Ever heard of Filial Responsibility Laws? Well, these are laws obligating you to provide financial support for your indigent parents. Yes, obligated under law. According to the National Center for Policy Analysis, 21 states across the country (including states like Connecticut, New Jersey and Massachusetts) allow for a civil action to obtain financial support for indigent parents. At least 12 states may impose criminal penalties on children who refuse to support their parents. Though rarely enforced, these laws may be dusted off by states looking to save money on Medicaid bills.
Taxpayers that itemize personal deductions instead of claiming the standard deduction may deduct qualifying medical expenses to the extent that such expenses exceed 10 percent of adjusted gross income (“AGI”). Taxpayers that are 65 years or older, or turned 65 during the tax year, may deduct unreimbursed medical care expenses that exceed 7.5% of AGI. This threshold amount remains at 7.5% of adjusted gross income for these taxpayers until Dec. 31, 2016. I.R.C. §213(f).
A long-term care insurance premium, or a part thereof, may be deductible from federal income taxes as a medical expense. Acknowledging that it can’t assume the primary role in paying for Americans’ long-term health care, the federal government offers tax incentives to encourage middle-aged and older taxpayers to assume responsibility for their future health care needs. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) included provisions for favorable tax treatment of Long-Term Care insurance (LTCi) contracts that meet statutory qualifications.
All of us as taxpayers continually think we have a lot of expenses that we can itemize and deduct to help reduce our respective tax bills. But they come, they go, all for naught and no effect. The problem usually arises from the fact that our costs regularly fall just short of the required income thresholds for some categories of deductions. One solution is “bunching expenses,” which is a term used to describe incurring as many expenses as possible in a particular category during a particular tax year. Of course, doing this in one tax year will usually significantly diminish any chance of repeating it the following year.
Working at the IRS or representing clients before the IRS has its perks and advantages. Having the opportunity to observe all of the outlandish and bizarre attempts by taxpayers to assert legitimate,valid tax deductions is rare. On one hand, it certainly may involve the observance of a unique form of comedy. Here are some odd, crazy, unusual, and please note, unsuccessful tax deductions:
*Crazy Home Office Deductions
A woman that ran a home business tried to deduct what was basically her home refrigerator. She explained to her tax professional that she kept drinks in the refrigerator for customers and other business associates that came to the home office for meetings. According to the owner, this occurred four or five times a year while the refrigerator was in her kitchen and served her family.
Unsure of whether you should use the standard deduction amount, or take the time to itemize deductions? The answer is fairly straightforward; you should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you don’t qualify for the standard deduction. Taxpayers should initially calculate itemized deductions and then compare that amount to their standard deduction to determine which provides the greater benefit. A taxpayer may be subject to a limit on some itemized deductions if he or she exceeds the adjusted gross income limits.