If you paid for medical or dental expenses in 2013, you may be able to get a tax deduction for costs not covered by insurance.
Here are some facts about claiming the medical and dental expense deduction.
1. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return using Schedule A of Form 1040. You cannot claim medical and dental expenses if you take the standard deduction.
2. Deduction is limited. You can deduct medical and dental expenses that are more than 10% of your adjusted gross income if your under age 65. If your adjusted gross income before itemized deductions and exemptions is $50,000, you can only deduct unreimbursed medical expenses that exceed $5,000. For those 65 and up, the income limit is 7.5%
3. Expenses paid in 2013. You can include medical and dental costs that you paid in 2013, even if you received the services in a previous year. Keep good records to show the amount that you paid.
4. Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.
5. Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.
6. Travel is included. You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2013.
7. No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.
Jéneen R. Perkins is a freelance accountant and consultant serving entrepreneurs, families and small businesses. She prides herself in being fluent in English instead of “Accountant-ese”.
I frequently get updates via email about the latest news headlines, etc. I received one that caught my eye for two reasons: it was about money and marriage. Being that money is usually the number reason why married couples fight and get divorced, I never thought the two mixed very well. And honestly, I feel that what’s mine is mine! But the article gives a brief summary about why one should go through the suggested checklist. But I am going to provide a clear do-it-yourself debt credit cleanup (if necessary) for you and your future spouse.
Don’t just take out the trash; take out your credit reports/scores too.
Every year, you and your future spouse are allowed to get 3 free credit reports. You are allowed one from each bureau: Transunion, Experian, and Equifax. I strongly suggest checking all three, as errors can be listed on all reports, some, or just one. By combing through the reports, both of you can literally see what you two are up against financially. Once, you checked the reports, I would suggest checking your scores as well. Typically, you can get access to your score from each of the bureaus for a fee. But sometimes you can get access to your score for free if you sign up for a monthly membership and cancel it after the trial period. Note: I recommend that you use the 3 sites above only. There are a lot of “knock-off” credit score websites out there.
Talk the talk, and walk the walk
Now that all of your financial skeletons are out to the closet: talk about it. Create two set of goals: one for short-term goals to be met in 1 month up to 1 year, and anything else should be considered long-term. Also, be sure to include something rewarding, like a vacation or some luxury item that is affordable. Make a budget based on all sources of regular income, and compare it with your goals for a reality check. If you are having trouble making a budget give me a call or try a “budget theory” like this one. Something will probably have to be put aside if it is not a high priority. For instance, purchasing a new 90 inch HD TV in 6 months can be a financial goal and a reward. But let’s not give it artificial priority when a high interest credit card could be paid off in the same time frame. One last thing, open a joint account for the wedding and establish a regular savings plan! If you are having trouble
Cross all the T’s and Dot all the I’s
Exchange and vows and become one. Then make all the necessary adjustments and updates regarding: health insurances (pick the best option), life insurance policies (again, pick the best), bank accounts, and credit card accounts. If you are sharing everything, then do it all the way! Also, this would be a great time create a will and, or a living will.
Shoot for the moon and the stars
Again, this is another planning step. But it’s planning for your life after marriage and in the future. Do you want a home? Are you going to travel frequently as a couple? Are you going to have children? Whose is going to retire first? There is a boat load of questions that need to be answered before and after marriage. As long as it is feasible and affordable, why not incorporate it in your plan? Even if it sounds ridiculous to you but is the dream of your spouse, look into it. Honestly, your financial plans should mirror your lives. As result, it will change as life changes.
Have a question about this article? Ask me here!
I love to hang out with family and friends. Who doesn’t, right? Recently, I noticed that I spend most of my free time hanging out, and I spend a lot of funds doing so. Now I have to ask myself: When is enough “enough”? I honestly believe that I can save some money, and still have some fun.
I keep a schedule of budget and my cash flow in an Excel spreadsheet. I typically review it 3 to 4 times a month to see if I am staying within my limits. But I never established a true limit for entertainment and dining out. I thought I could go without hanging out. The truth is I tried and felt extremely bored. It’s time that I find a common ground for my financial goals and my social life.
I reviewed my budgets and spending from August through October of this year. I spent $775.91 during this time frame. This averages to $258.64 each month. Needless to say, I am so ashamed. I could have paid for an upcoming vacation with these funds.
My approach to my problem is simple: Make a plan and work the plan. The new plan is to cap all my entertainment expenditures to $120 each month. This should allow me enough “wiggle room” between work, my social calendar, and my financial goals. After all, I did not include a boring life in my 3 year plan and the first step in my plan is to be realistic in regards to my money habits.
To work this plan, I feel that physically drawing out $120 each month to spend force me to stay within that boundary. It’s a form of an adult allowance, and to be honest I miss the days when I did get an allowance. The excess funds will have to be deposited in the safest place I know: my online savings account for emergencies. By doing this, I will be implementing one of my favorite money principles: Out of sight, out of my mind.
Also, I have to change my social habits as well so I can stretch that $120. Two simple changes should do it. The first change I will have to make is eating before I meet up with my girls for cocktails. If I did this every time I went out between August and October, I would have saved approximately $ $250. The second habit I will have to implement is a drink maximum along with a drink price limit. I am the type that loves the $15 martini. By sticking to a 3-$10-drink maximum once a week, I could save $120 each month.
Making these small changes should put me on a path that leads to my financial goal… leaving many happy hour celebrations behind.
Do you know your limits? Post a comment or question.
Since October 2008, I have pondered reasons as to why the recession began. Over the past 3 years, I have read numerous articles and watched various news programs, each claiming to thoroughly explain the real reason for the recession. The housing market was often fingered as the blame; with its sub-prime mortgages and “no-doc”loans. However, I do not think it was the back-alley practices or suspicious activities of the real estate market that tanked our economy. I truly it believe it is our good old attitude in the USA of “My credit limit or score says I can afford it”. I only feel this way after reading an article provided by Investopedia’s Financial Edge on Twitter called “Why Today's 'Recession' Tops The Great Depression”. Based on the information in the article, our nation should have struggled more than our predecessors did during the 1930s. The article is laced with a lot of financial jargon. Here are the major comparison points of the article:
“1). The nation’s debt: During the onset of the Great Depression (June 1929), the national debt was $17 billion, which of only 16% of our gross national product (GNP can be viewed as the net worth of the US). Also, there were no significant interest payments. As a nation, we only incurred debt during wartime, and promptly paid our bills during peacetime. The current debt level is near $15 trillion, of which $434 billion represents interest payments. In 2010, our gross national product was almost $15 trillion. 4.5 billion of our debt is serviced by foreign nations, over half of this amount is owned by China and Japan.
2). The nation’s spending: Programs like Social Security and Medicare are tremendously underfunded. Another $62 trillion dollars, in addition to the outstanding $15 trillion in debt, is needed to properly fund these programs. This is calculated to be approximately $528,000 per household. These figures are expected to increase as baby boomers retire. During the Great Depression, these programs didn’t even exist.
3). The workforce: Unemployment was calculated differently during the Depression when compared to the current formula used today. But the overall gist is that unemployment levels higher if today’s numbers were recalculated. As of August 2011, unemployment was at 9.1%.
4). The real estate market: Average home prices dropped 31% during the Depression, compared to a 33% decrease in the beginning of 2011.
5). The economy: Due to the deficit of $15 trillion, caused by the government overspending funds, our gross domestic product was overstated (GDP is similar a person’s gross wages from their job). If the deficit was included in this calculation, the US has not experienced GDP growth since World War II.”
The author goes on to say that there were some historical and other economic events impacted our current financial state. I agree with him to a certain extent. It is true that the government’s effort to spend its way out of a deficit was not the best decision. By doing so, a false sense of hope and security was created. Please read the full article at: http://financialedge.investopedia.com/financial-edge/0911/Why-Todays-
My question is: Why did we buy into it, literally? Our own government is basically maxed out, the deficit equal the total output of all US based firms. And still, “overall consumer credit levels increased by 6% in July 2011”, according to the Federal Reserve.“In 2010, consumer debt amount to $2.4 trillion, or $7,800 for every US resident…These figures do not take into account mortgages. Typical, credit card debt accounts for one-third of all consumer debt, while installment loans (student, automobile, boat, etc.). comprise the other 67%. As of December 2010, the average homeowner spent 15.27% of their disposable income to pay creditors, while renters spent23.99%.”(http://www.money-zine.com/Financial-Planning/Debt-Consolidation/Consumer-Debt-Statistics/). In an economic letter posted by the Federal Reserve Bank of San Francisco, it states that “One of the striking features of the U.S. economic downturn that started in 2007 is that it was preceded by the largest increase in household debt in recent history (http://www.frbsf.org/publications/economics/letter/2011/el2011-02.html).”
I can find so much more information that proves that we, as nation, continued to buy everything we could get our hands on…with credit. It is true that the real estate market crash prompted the recession. However, we as consumers added fuel to the fire.
Now I am more motivated to become debt free because now I understand I am the only one responsible for my financial future.
I have saved every spare penny I had for the last 3 months. At the beginning of September, I had enough to catch a plane out of my hometown. I am sad to say that it is no longer an option, and there are 8 days left in month. So now I am askingmyself, “Where did it all go?”
I thought I got all the splurging out of my system during my vacation in August. It seems that I brought back a case of “spend-money-on-frivolous-things-osis”. In an attempt pinpoint my initial symptom, I did a transaction search on both of my bank accounts to see when and where this all began.
I have two checking accounts because I have separate purposes for each: one is for bills and recurring purchases I have to make (food, water, personal items), while the other is my very own discretionary fund. I just cannot afford to be without shelter, heat, hot water, food and a vehicle. So I made one of the checking accounts the “bills only” account. The pay from my full-time gig is set-up for direct deposit, and the bills are set to be paid automatically.This way I don’t have to worry about mailing payments or making payments in person. Every time I receive a direct deposit, bills are paid. If money is leftover, it still there to be a cushion for emergencies. My second checking account is what I use to have fun, so to speak. Those nights out on the town are supposed to be purely funded by the remaining net pay from my part-time gig (also direct deposited). I use the funds from the part-time gig to cover my cost of commuting 5 days of week to two jobs, student loan payments, and vacation savings. My fun money is whatever that’s left and I use it however I choose.
But I have been choosing to do whatever too much! With my first account I noticed that I went over budget on some stuff I purchased for me to live a daily basis (food, cleaning supplies, etc.). And I also realized I never set a budget for the gathering I had at my house at the beginning of the month. As result, I overspent by $120! Typically, I overspend by $30 or so. How could I have done this? Well, whatever is in my bills only account stays there, and becomes part of my cash cushion, which was roughly $100. Since I spent $120 more than usual, now I have to repay the bill account the $120 I failed to budget for. Also, the automatic payments for my car did not start. So, there was a hefty slush fund in my bill account at the tips of my fingers. My second account contained transactions that were typical: student loan payments and a bar charge here, a restaurant there. But I never paid my bill account for the $120 I spent, and continued to spend normally. I spent my money twice, which means I will have to use my savings to cover any upcoming bills. I am determined not to let this happen again.
To be financially secure, you have to have a plan. But the key to sticking to the plan, is working the plan. Now is the time to re-work my plan. My first step is giving that financial institution that holds my car loan a mouth full!! I contacted them twice about this, once in August, and again during Labor Day weekend. I am starting to become paranoid and think they are out to ruin my credit rating!! What bank does not want your money? To fix this problem, I will use the multiple account option with the direct deposit offered at my first gig to allocate the funds directly to the bank. Second step, stick to my guns by paying out cash as I said I would:“Make retirement contributions, savings deposits, and bill payments automatic (in this order).”If I made that $120 payment to myself from my discretionary account, I would have something to show for all the cash I saved from the months before. The final step, I have set a limit on my cash cushion and vowed physically remove any excess. Apparently, it grew without my knowledge. Once I get this situation under control, then I focus on recouping my lost savings and saving more on average each month.
I honestly understand what it means to “always pay yourselffirst”….now. But I am allowed to make mistakes in life; I just cannot afford to make the same mistakes repeatedly… I managed to not shop online for two weeks
cold turkey. I can do better than this!!!!
Being that I am an online shopper, the first thing I had to do was change my email habits. I watched how often emails from my favorite retail spots came in (and when they came in). I received a "sale" email every 25 minutes on average. And when I check my email every morning before work, I had at least 15 new emails after deleting the ones I received already.
I can say with no shame or pride: I am shopaholic. However, the excuse I made when clicking "CONFIRM ORDER" each time is "I can never beat a deal like this". That's the fallacy in my logic. Even though I have been studying accounting and finance since 2002, I could not overcome the tactics online shopping sites use, the ones I learned about in college and grad school. It's basically creating the need for urgency or value to the customer directly. Even though you may have 2 pairs of black boots, this 3rd pair could be slightly different or go better with your wardrobe. At one point, I was spending $250 each month because of my online shopping habit.
So I said enough is enough. On 9/15/11, I created a filter with my Yahoo email address for each one of sites I shop regularly. It took some time, and some real will power, to sort through all 226 of my contacts to group these cancerous email addresses together in one list. When I was completed, I had to set up 29 filters and send them to a special folder. For some reason, Yahoo does not allow you to use one filter for multiple email addresses. The principle I am using here: Out of sight, out of mind. If I do not see them while checking emails that are actually important to me, and then I won't have the urge to open them and see all of those pretty pictures, discount and shipping promotions. Also, I am hoping I will be disgusted with the amount of emails I receive.
I know it's a small step...But it's a step in the right direction. I am also hoping that the pair Pumas I have been eyeing DON'T go on sale!
"Putting My Money Where My Mouth Is" is a journal about real life experiences and concerns of Jéneen R. Perkins. The purpose of the blog is to exhibit the real life challenges and answer the tough questions posed by the concepts of business, entrepreneurship and money.