How should I deal with very high medical expenses on a low income in our taxes?

Submitted by greencymbeline t3_126b15d in personalfinance

My husband makes approximately $55,000 a year and I make nothing because I am disabled but not on disability yet. Yes, we’re poor.

Last year I paid about $24,000 out-of-pocket on medical and dental expenses. This was possible due to gifts from my parents.

How should I handle this on our taxes? I believe this astronomical number should somehow be represented on our taxes.

More info: I have very extensive health issues and rely upon this individual health plan to cover stuff that most other plans would not cover. So please don’t tell me to get on Obamacare.

Edit: he makes $55,000 not $65,000.

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DeluxeXL t1_je8fm4d wrote

Do you itemize your deductions or take standard deduction? Medical expenses above 7.5% AGI can be itemized.

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greencymbeline OP t1_je8gxdb wrote

Usually we would do standard, but this year it’s been so high due to dental stuff, I’d have to think itemizing would result in a better outcome. But that’s what I’m here asking. I know no one here can do my taxes here or tell me the exact answers but just looking for info.

Does it matter that the $24,000 was a gift?

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DeluxeXL t1_je8hg4l wrote

> But that’s what I’m here asking

You said $24k was out of pocket.

$55k was the AGI.

7.5% of $55k is $4125.

$24k - $4125= $19875.

Do you have anything else to itemize? Such as

  1. $19875: medical expense
  2. $_____: charitable donations
  3. $_____: property tax, real estate tax, etc.
  4. $_____: either state income tax or state sales tax (#3 and #4 are capped at $10k together)
  5. $_____: mortgage interest
  6. $_____: losses in federal disaster areas
  7. $_____: gambling losses

If your total itemized deduction exceeded $25900 (standard deduction for MFJ), take the itemized deduction.

> Does it matter that the $24,000 was a gift?

No

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greencymbeline OP t1_je8iso2 wrote

I made an edit in my OP: our income is $55k, not $65k.

Thank you for the explanation, although I’m not sure what the outcome means. Thanks for the info about the gift.

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DeluxeXL t1_je8izn3 wrote

Do you own a home? If yes, how much did you pay in property tax and the interest portion of mortgage in 2022?

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greencymbeline OP t1_je8qopx wrote

I just want to add here—for anyone’s info or curiosity. We have NO debts, even credit card debt. Stellar credit scores. No student debt (both college grads), no car debt, no loans, no mortgage.

My disability (me getting sick) took away a HUGE part of our income.

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NotThatGuy_Pal t1_je8ifdc wrote

It all depends on other info you haven’t given. Do you pay for a mortgage? What do your real estate/property taxes look like?

You can only deduct medical expenses above 7.5% of your AGI. With only his income and no other adjustments, medical expenses for deductions would be around 19k. If that’s the only deduction you have, you’d be taking the standard. If you have mortgage interest, property taxes, insurance premiums, charitable contributions, etc (Google Schedule A to see deductions)..then you’d be able to deduct medical expenses as long as itemized deductions exceed $25,900 (assuming you’re filing jointly)

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greencymbeline OP t1_je8q2c9 wrote

We rent and have only minimal taxes on our old cars.

Thanks for the info, this is helpful.

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29threvolution t1_jea8to6 wrote

You're suuuuuuper close to it making more sense to file Married Filing Separately. This is usually the best way to reduce taxes when one spouse has large medical bills. In fact the turbo tax article on the subject uses almost the same numbers as your situation to explain it.

Based on the info provided though there's no way we strangers on the internet could tell you which method will work out in your favor though. You need to get yourself a good tax software, I prefer Turbo Tax but I know many will hate on it. Run the numbers both ways for married filing jointly and married filing separately to see which method reduces your tax bill the most.

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bros402 t1_je9y1c6 wrote

Itemize it. Make sure to include mileage!

Everything over 7.5% of AGI can be deducted on taxes. Check what it is for your state (Here in NJ, everything over 2% can be deducted)

"Obamacare" is just the nickname the Republican gave to the healthcare marketplace.

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