Don’t Forget These Often-Overlooked Tax Deductions

As tax time draws near, you want to make sure you file all the proper forms and take all deductions you’re entitled to. The following are some helpful but often overlooked deductions to keep in mind as you prepare your 2013 taxes:

Estate Planning Attorney Fees: If you met with an estate planning attorney within the past year, some of your legal fees may be tax deductible. We suggest that 20% of the total fees that you paid to our firm can appropriately be considered deductible tax advice.  Please read Part 4 of our Tax Time Series for more details.

Medical Expenses: To take advantage of the medical expenses tax deduction, you have to itemize and deduct medical expenses, and for 2013 you can write off only the amount of those expenses that exceeds 7.5% of your adjusted gross income. For retirees with low incomes, this threshold can be easy to cross. See IRS Publication 502 Medical and Dental Expenses for more details. Please also read Part 3 of our Tax Time Series.

Caregiver Deductions: As a caregiver, you likely pay for some care costs out-of-pocket.  Did you know that if you are caring for a relative, you might be able to claim tax deductions and credits for certain medical expenses?  These can include dental treatments, transportation to medical appointments, health insurance premiums, and long-term care costs. The rules below apply to caregivers for the 2013 tax year (filed in 2014).  See IRS Publication 502 for more details. Please also read Part 1 of our Tax Time Series.

Parental Deduction: If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to get an exemption $3,950 (in 2014) for him or her. Please read Part 2 of our Tax Time Series for more details.

Long-Term Care Insurance Premiums: Premiums for “qualified” long-term care insurance policies are treated as an unreimbursed medical expense. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse, and other dependents.

Social Security Benefits: If you file a federal tax return as an individual and your combined income, including half of your Social Security benefits and nontaxable interest income is between $25,000 and $34,000, 50% of your Social Security benefits will be considered taxable. If your combined income is above $34,000, 85% of your Social Security benefits is subject to income tax.

Real Estate Taxes: If you don’t have enough deductions to itemize, you can still increase the amount of your standard deduction by the amount of your real estate taxes up to $500 ($1,000 if filing jointly).

Home Sale Exclusion: If you sold your home in 2013, you might be able to exclude up to $500,000 (if you are married) or $250,000 (if you are single) from your income. If a surviving spouse sells the home, he or she can still claim the exclusion as long as the house was sold no more than two years after the spouse’s death.

Elderly or Disabled Tax Credit: Some low-income elderly or disabled individuals are entitled to a special tax credit. To be eligible, you must meet income limits. For more information, click here.

Gifts:  If you gave away more than $14,000 in 2013, you are required to file IRS Form 709, the gift tax return. Please read our blog post Gifting and the New Gift and Estate Tax Exclusion Numbers for more details about gifting and taxes.

For more details, please see the IRS Tax Guide For Seniors.

Please note that getting a tax refund might affect your Medicaid or Social Security benefits. However, since everyone’s situation is different, it is wise to contact a Certified Elder Law Attorney such as myself to walk you through this process and ensure that you are not doing anything to affect Medicaid eligibility. Call us today at the Fairfax and Fredericksburg Elder Law Firm of Evan H. Farr, P.C.at 703-691-1888 in Fairfax or 540-479-1435 in Fredericksburg to make an appointment for an introductory consultation.

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.

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