When tax planning for 2012, I'm paying special attention to deductible health care expenditures, since the hurdle to deduct them will be much higher in 2013. In 2012, those who itemize on their federal income tax returns can deduct health care expenses that exceed 7.5% of adjusted gross income (AGI). In 2013, this percentage will increase to 10.0% of adjusted AGI.
As a result, if I estimate that my health care spending in 2012 will be more than 7.5% of AGI, I will want to maximize these expenditures this year, since my spending will have to be even higher to qualify for the health care deduction in 2013.
Here are a few strategies I could use to accelerate some tax-deductible medical expenses into 2012 from 2013.
First, I could move up routine health care that I normally would schedule early in the new year, such as regular health, dental and eye exams, into late 2012 so as to pay for these services this year.
Second, prior to yearend, I could purchase extra quantities of nonperishable medical supplies that I use regularly for chronic conditions.
Third, when I refill ongoing prescriptions, I could purchase the maximum amount allowed by my insurance plan (usually three months worth) before the end of the year.
Fourth, I could prepay some premiums on my health insurance plan that I otherwise would pay in 2013 (checking with my tax advisor about any limitations on such prepayments). For me this amount would be limited to anything not paid by my employer, but if I purchased an individual policy for which premiums are not otherwise deductible, I would be able to deduct the full amount of the premiums.
Fifth, I would prepay for ongoing health services even though they may not be completed until 2013. For example, if I was having dental implants inserted, a process that can take many months, and this procedure was started in 2012, but won't be completed until 2013, I would considering prepaying the total cost up front.
Sixth, I would research the list of deductible health care expenses as show in Internal Revenue Service publication 502 (http://www.irs.gov/publications/p502/ar02.html#en_US_publink1000178947) to be sure that I don't overlook any qualified expenses. This list is long and includes many expenses that are easy to overlook, such as the cost of acupuncture; lead-based paint removal; mileage, meals and lodging related to obtaining medical treatment; medical conferences related to chronic illnesses; and some health-related legal expenses, to name just a few.
Carolyn T. Geer, online.wsj.com/article=personal_fin_newsreel, New Law Brings Higher Hurdle to Deduct Care
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- health care spending
- adjusted gross income