If you, your spouse, or dependents have significant medical or dental costs in 2019, you may be able to deduct those expenses when you file your tax return this year. Here are eight things you should know about medical and dental expenses and other benefits:

1. You need to itemize. You can only claim medical expenses that you paid for in 2019, and only if you itemize on Schedule A on Form 1040. If you take the standard deduction, you can’t claim these expenses.

2. Deduction is limited. You can deduct all the qualified medical costs that you paid for during the year. However, for 2019, you can only deduct the amount that is more than 7.5 percent of your adjusted gross income.

3. Expenses must have been paid in 2019. You can include medical and dental expenses you paid during the year, regardless of when the services were provided. For example, if you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Be sure to save your receipts and keep good records to substantiate your expenses.

4. You can’t deduct reimbursed expenses. Your total medical expenses for the year must be reduced by any reimbursement. Costs reimbursed by insurance or other sources do not qualify for a deduction. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

5. Whose expenses qualify. You may include qualified medical expenses you pay for yourself, your spouse, and your dependents. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement, or those with a qualifying relative who is not your child.

6. Types of expenses that qualify. You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. You can only deduct prescription medication and insulin (i.e., no over-the-counter medicines). You can also include premiums for medical, dental and certain long-term care insurance in your expenses, and you can also include lactation supplies.

7. Transportation costs may qualify. You may deduct transportation costs primarily for and essential to medical care that qualifies as a medical expense, including fares for a taxi, bus, train, plane, or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 20 cents per mile for 2019.

8. No double benefit. You can’t claim a tax deduction for medical and dental expenses you paid for with funds from your Health Savings Accounts (HAS) or Flexible Spending Arrangements (FSA). Amounts paid with funds from those plans are usually tax-free. This rule prevents two tax benefits for the same expense.

Please call if you need help figuring out what qualifies as a medical or dental expense.

Parents who adopted or started the adoption process during 2019 may qualify for the adoption credit. Generally, the credit is allowable whether the adoption is domestic or foreign. However, the timing rules for claiming the credit for qualified adoption expenses differ, depending on the type of adoption.

Here are nine facts to help people understand the credit and if they can claim it when filing their taxes:

1. An eligible child must be younger than 18. If the adopted person is older, they must be unable to physically take care of themselves.

2. The maximum adoption credit taxpayers can claim on their 2019 tax return is $14,080 per eligible child. For 2020, this amount is $14,300. The tax year for which you can claim the credit depends on three factors: when the expenses are paid, whether it’s a domestic adoption or a foreign adoption, and when, if ever, the adoption was finalized.

3. Income limits could affect the amount of the credit you receive. The income limit on the adoption credit or exclusion is based on your modified adjusted gross income (MAGI) and may be subject to a phaseout. In 2019, this phaseout begins at $211,160 and ends at $251,160. If your MAGI amount is below $211,160 for 2019, your credit or exclusion won’t be affected by the MAGI phaseout, whereas if your MAGI amount for 2019 is $251,160 or more, your credit or exclusion will be zero.

4. This credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for 2019. Any credit leftover from their owed 2019 taxes can be carried forward for up to five years.

5. Qualified expenses include:

• Reasonable and necessary adoption fees.
• Court costs and legal fees.
• Adoption related travel expenses like meals and lodging.
• Other expenses directly related to the legal adoption of an eligible child.

6. Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.

7. Qualified adoption expenses don’t include costs paid by a taxpayer to adopt their spouse’s child.

8. In some cases, a registered domestic partner may pay the adoption expenses. If they live in a state that allows a same-sex second parent or co-parent to adopt their partner’s child, these may also be considered qualified expenses.

9. Taxpayers should complete Form 8839, Qualified Adoption Expenses to figure how much credit they can claim on their tax return.

Questions about the adoption tax credit? Don’t hesitate to call.

If you’re a taxpayer who has not yet filed their 2019 tax return, you may be getting ready to do so now. One of the first things you will need to do – before visiting your tax preparer – is to gather all of your year-end income documents. Doing so ensures that your tax return is complete and accurate.

Here are some of the documents taxpayers need to have on hand:

1. Social Security numbers of everyone listed on the tax return. Many taxpayers have these numbers memorized. Still, it’s a good idea to have them on hand to double-check that the number on the tax return is correct. An SSN with one number wrong or two numbers switched will cause processing delays.

2. Bank account and routing numbers. People will need these for direct deposit refunds. Direct deposit is the fastest way for taxpayers to get their money and avoids a check getting lost, stolen or returned to the IRS as undeliverable.

3. Forms W-2,Wage and Tax Statement, from employers.

4. Forms 1099,Miscellaneous Income, from banks and other payers.

5. Any documents that show income. These include income from virtual currency transactions. Taxpayers should keep records showing receipts, sales, exchanges or deposits of virtual currency and the fair market value of the virtual currency.

6. Forms 1095-A, Health Insurance Marketplace Statement. Taxpayers will need this form to reconcile advance payments or claim the premium tax credit.

7. The taxpayer’s adjusted gross income from their last year’s tax return.

Most tax forms from employers and financial institutions arrived by mail or were available online by early to mid-February. Review them carefully to make sure any information shown on the forms is accurate. If it is not, then contact the payer ASAP for a correction. If there is an error, you will receive an amended or corrected form.

If you think you are missing any tax forms or have any questions, please call the office.