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You can lower your income tax if you can itemize your deductions so they add up to more than the standard deduction given to everyone. The two major itemized deductions are typically mortgage interest paid and state income taxes withheld.
Retirees typically have little or no mortgage interest and [link widoczny dla zalogowanych] a lower income than average so their state income tax is not [link widoczny dla zalogowanych] that much. But their medical expenses are greater due to age-related issues. So, they must rely on itemizing all their medical expenses to help offset the federal income taxes they must pay.
Make sure you recognize everything you can itemize as a medical deduction. But, remember the only expenses that aren't reimbursed to you [link widoczny dla zalogowanych] are deductible. And you can only deduct for expense you actually paid during the year.
According to the IRS Publication 502, medical expenses you can itemize include the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the [link widoczny dla zalogowanych] body. These include the costs of equipment, supplies, and diagnostic devices needed for these purposes.
The expenses must primarily alleviate or prevent a physical or mental defect or illness - not merely benefit general health. Generally, only drugs [link widoczny dla zalogowanych] that require a doctor's prescription are deductible - not over the counter drugs.
You can deduct medical expenses you spend for yourself, your spouse, and any other relative who is your child, son or daughter-in-law, grandchild, mother or father, stepfather or stepmother, father- or mother-in-law, sibling, stepbrother or stepsister, brother- or sister-in-law, aunt, uncle, niece, or nephew. [link widoczny dla zalogowanych] But to do so, you must pay over 50% of that relative's support.
If you're driving someone to receive medical services, you [link widoczny dla zalogowanych] can deduct $0.23 per mile (2012) as an itemized expense.
The cost of medical insurance is deductible. So premiums are deductible that you pay for:
Medicare Part C coverage (Medicare Advantage insurance)
Medicare Part D coverage (prescription drugs) - they average about $300 per year
Supplemental Medicare Coverage (Medigap Insurance)
Your deduction limits for LTC (Long Term Care) Insurance premiums you pay during the year for 2012 [link widoczny dla zalogowanych] are age-dependent. Here [link widoczny dla zalogowanych] are the limits: $350 if you're 40 or under, $660 from 41 to 50; $1,310 from 51 to 60; and [link widoczny dla zalogowanych] $4,370 from 61 to 70 years old.
Finally, your 2012 Standard Deduction if you're 65 or older is dependent on your filing status. If you're status is Single, then your standard deduction is $7,400; if you're status is Married Filing Jointly, then your standard deduction is $14,200.
Once you've totalled all these yearly medical expenses, only the amount of expense that exceeds 7.5% of your Adjusted Gross Income contributes to the deductible itemized medical expense. So, [link widoczny dla zalogowanych] unless your expenses exceed that 7.5% threshold, you'll have no medical deductions to report.
Your Adjusted Gross Income is your total income from all sources shown on the tax return line called Total Income less non-itemized deductions (often called 'above the line' deductions) such as Alimony paid, Moving Expenses and IRA deductions.
Though a retiree's lower income lowers that 7.5% AGI threshold for deduction, he has a higher standard deduction when they reach 65 years old.
Medical expenses increase significantly as you go through you retirement years. Making a habit of cataloging and tabulating them should help reduce your taxes.
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