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Everything You Need to Know About “Below the Line” Deductions

By Estate Planning, Government Benefits, Tax Law

Below-the-line deductions, also known as itemized deductions, include any deduction reported under the line for AGI calculation on your tax return.

Each tax season, you can choose whether to itemize your deductions or take the standard deduction. The standard deduction refers to a set dollar amount, primarily based upon your filing status that non-itemizers subtract from their income before income tax is applied.

 

For the 2022 tax year, the standard deduction numbers were:

  • $12,950 for single filers and married individuals filing separately
  • $19,400 for the heads of household
  • $25,900 for married couples filing jointly

Itemized deductions include:

  • Out-of-pocket medical expenses exceeding 7.5% of your AGI
  • A maximum of $10,000 of state and local taxes combined
  • Interest paid on a maximum of $750,000 of home mortgage debt
  • Contributions made to a charity
  • Casualty losses due to a federally declared disaster

Aside from the deductions mentioned above, there is a catchall section for less standard itemized deductions, including:

  • Losses incurred from gambling
  • Amortizable bond premiums
  • Impairment-related work expenses incurred by individuals with disabilities

More information on claiming below-the-line deductions can be found on the IRS instructions for Schedule A.

 

At Bach, Jacobs and Byrne, P.A., we address tax issues as part of your estate planning, probate, and trust administration. If you live in Sarasota, Manatee, or Charlotte County, contact Bach, Jacobs and Byrne, P.A. at (941) 906-1231 to evaluate whether your estate plan is tax efficient.

August 17, 2022
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What are ‘above-the-line deductions,’ and why are they valuable?

By Estate Planning, Government Benefits, Tax Law

Before we get into above-the-line deductions, let us start with some helpful definitions:

Deduction: another way of saying ‘subtract.’ In the context of a federal tax return, a deduction is an expense you subtract from your gross income to determine your taxable income.

Itemized Deduction: the amount of money you spent on deductible expenses, for example: medical costs, state and local taxes, mortgage interest, and charitable expenses.

Gross income: the sum of all wages, dividends, capital gains, business income, retirement distributions, or other types of income.

Adjusted gross income (“AGI”): Your taxable income. (Gross income minus deductions)

An “above the line” deduction is a method by which you can reduce your taxable income. This type of deduction is subtracted from your gross income before determining your AGI.

 

You claim above-the-line deductions in Part II of Schedule I, some of which include:

  • HSA Contributions.
  • Moving expenses for members of the Armed Forces.
  • The deductible part of self-employment tax.
  • Contributions to self-employed SEP, SIMPLE, and qualified retirement plans.
  • Health insurance premiums for self-employed individuals.
  • Penalties associated with early withdrawals of savings.
  • Alimony payments (from divorce agreements before Dec. 31, 2018).
  • Traditional IRA contributions.
  • Contributions to an Archer medical savings account.

More details and rules for claiming above-the-line deductions may be found in the Form 1040 Instructions.

 

At Bach, Jacobs and Byrne, P.A., we address tax issues as part of your estate planning, probate, and trust administration. If you live in Sarasota, Manatee, or Charlotte County, contact Bach, Jacobs and Byrne, P.A. at (941) 906-1231 to evaluate whether your estate plan is tax efficient.

August 15, 2022
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What is the “Secure Act 2.0”?

By Asset Protection Planning, Elder Law, Estate Planning, Government Benefits, Tax Law

On March 29, 2022, the House of Representatives passed the Securing a Strong Retirement Act (“the Act”) with a bipartisan vote of 414 to 5.

The Act has been nick-named the “Secure Act 2.0” as it aims to build upon the 2019 legislation by improving employee retirement savings opportunities.

 

Noteworthy changes passed by the House include:

Mandatory Automatic Enrollment/Escalation: this would require employers to automatically enroll their newly hired employees in retirement contribution plans at 3% of the employee’s pay, increasing annually by 1% to at least 10% but no more than 15% of an employee’s paycheck.

Increase 401(k) Catch-Up Contributions: Keeping the existing 401(k) and 403(b) catch-up contribution limits for those aged 50, the Act would increase the annual catch-up limit for those aged 62-64 from $6,500 to $10,000 beginning in 2024.

Allow Roth Matching Contributions: Beginning in 2023, employers matching contributions would allow employees to elect some or all of their matching contributions to be designated as Roth contributions.

Delay Mandatory Distributions: the RMD distribution age would further increase to:

  • 73 starting in 2023
  • 74 starting in 2030
  • 75 starting in 2033

Expedite Part-Time Worker’s participation: The SECURE Act 2.0 would shorten the period for eligibility from three years to two years.

Authorize Student-Loan Matching: Under the SECURE Act 2.0, employers would have a statutory basis for matching contributions based upon employees’ student loan payments, regardless of whether the employee is making retirement contributions.

 

Incorporate tax planning for retirement accounts into your estate planning by contacting Bach, Jacobs & Byrne, P.A. at (941) 906-1231.

August 8, 2022
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How do these changes in the SECURE Act affect me?

By Elder Law, Estate Planning, Government Benefits, Tax Law
  • An older RMD age will allow IRA owners to defer withdrawals, allowing assets to continue growing for longer.
  • Removing the age limit for individuals to contribute to their IRA accounts benefits those who retire at older ages and seek to continue contributing to their IRAs.
  • IRA beneficiaries must withdraw assets in an inherited IRA or 401(k) within ten years.
  • Before the law, if you withdrew assets from your IRA before age 59.9, you were subject to an income tax and a 10% penalty. The secure act adds an exception to this rule for new parents, allowing for a $5000 withdrawal after the birth or adoption of a child.
  • Part-time employees who work at least 500 hours annually for three years may contribute to a 401(k) plan. This is a significant decrease from the earlier 1,000 hours per year requirement.
August 5, 2022
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Important changes in the SECURE Act

By Elder Law, Estate Planning, Government Benefits, Tax Law

Important changes in the SECURE Act include:

  • The required minimum distribution age (“RMD”) increased from 70.5 to 72 years old.
  • Removal of the age limit for IRA contributions.
  • The requirement that inherited retirement account distributions must be taken within ten years.
  • Penalty-free withdrawals for new parents.
  • Long-term employees working part-time can enroll in 401(k) plans.
August 3, 2022
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What is the SECURE Act, and how can it affect my retirement?

By Elder Law, Estate Planning, Government Benefits, Tax Law

The “SECURE” Act stands for ‘The Setting Every Community Up for Retirement Enhancement Act’ and was signed into law by former President Donald Trump on December 20, 2019.

The law changes many existing retirement rules to prevent elderly Americans from outliving their assets. This three-part series summarizes some of the changes in the law and describes how these changes affect Bradenton and Sarasota account holders of all ages.

August 1, 2022
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Statewide Medicaid Managed Care (SMMC) – Managed Medical Assistance Program

By Asset Protection Planning, Government Benefits, Long-Term Care, Medicaid Planning

Statewide Medicaid Managed Care (SMMC) is the program where most Medicaid recipients receive their Medicaid services.

There are two different parts that make up the SMMC program:

  • The Managed Medical Assistance (MMA) Program
  • The Long-term Care (LTC) Program

Medicaid recipients who qualify and become enrolled in MMA will receive all health care services (other than long-term care) from a managed care plan. Medicaid recipients who qualify and become enrolled in LTC will receive long-term care services from a Long-term Care managed care plan.

What does the Statewide Medicaid Managed Care program provide?

Medicaid members receive their health care services through a managed care plan. MMA plans cover services such as prescriptions, doctors’ visits and hospital stays.

All MMA plans offer the following health care services:

  • Advanced Registered Nurse Practitioner
  • Ambulatory Surgical Center Services
  • Assistive Care Services
  • Behavioral Health Services
  • Birth Center and Licensed Midwife Services
  • Chiropractic Services
  • Dental Services
  • Child Health Check Up
  • Immunizations
  • Emergency Services
  • Emergency Behavioral Health Services
  • Family Planning Services and Supplies
  • Healthy Start Services
  • Hearing Services
  • Home Health Services and Nursing Care
  • Hospice Services
  • Hospital Services
  • Laboratory and Imaging Services
  • Medical Supplies, Equipment, Prostheses and Orthoses
  • Optometric and Vision Services
  • Therapy Services
  • Physician Assistant Services
  • Physician Services
  • Podiatric Services
  • Prescribed Drug Services
  • Renal Dialysis Services
  • Clinic Services
  • Transportation Services

Medicaid applicants will receive a letter once you are approved for Medicaid informing them of the MMA plan the state has enrolled them with. Applicants are allowed to switch to an alternate plan in the first 120 days.

If you have specific questions regarding your Medicaid eligibility, the experienced elder law attorneys of Bach, Jacobs & Byrne, P.A. are here to assist you. Call us at (941)906-1231 to set up a consultation.

June 23, 2020
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Statewide Medicaid Managed Care (SMMC) – Long-term Care Program

By Asset Protection Planning, Government Benefits, Long-Term Care, Medicaid Planning

In 2011, the Florida Legislature created a new program called the Statewide Medicaid Managed Care (SMMC) program.

There are two different programs that make up the Statewide Medicaid Managed Care:

  • The Long-term Care (LTC) Managed Care Program
  • The Managed Medical Assistance (MMA) Program

Medicaid recipients who qualify and become enrolled in the Statewide Medicaid Managed Care – Long-term Care program will receive long-term care services from a long-term care managed care plan. Medicaid recipients who qualify and become enrolled in the Statewide Medicaid Managed Care – Managed Medical Assistance program will receive all health care services other than long-term care from a managed care plan.

What does the Statewide Medicaid Managed Care program do?

Medicaid recipients will receive their long-term care services from a managed care plan. These managed care plans will cover long-term care services only and do not cover medications, doctor’s visits or other healthcare related services.

All long-term care managed care plans offer the following services:

  • Adult Companion
  • Adult Day Care (Adult Day Health Care)
  • Assistive Care Services
  • Assisted Living Facility Services
  • Attendant Care
  • Behavior Management
  • Caregiver Training
  • Case Management
  • Home Accessibility Adaptation
  • Home Delivered Meals
  • Homemaker
  • Hospice
  • Intermittent and Skilled Nursing
  • Medical Equipment & Supplies
  • Medication Administration
  • Medication Management
  • Nursing Facility Care
  • Nutritional Assessment and Risk Reduction
  • Occupational Therapy
  • Personal Care
  • Personal Emergency Response System
  • Physical Therapy
  • Respiratory Therapy
  • Respite Care
  • Speech Therapy
  • Transportation

The state will send Medicaid recipients a letter notifying them as to whether or not they are required to enroll in Florida’s Statewide Medicaid Managed Care – Long-term Care program and provide a list of plans for their specific region.

If you have specific questions regarding your Medicaid eligibility, the experienced elder law attorneys of Bach, Jacobs & Byrne, P.A. are here to assist you. Call us at (941)906-1231 to set up a consultation.

June 22, 2020
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How to Get on the Florida Medicaid Waiver Wait List

By Asset Protection Planning, Elder Law, Government Benefits, Long-Term Care, Medicaid Planning

In Florida, the Medicaid program that helps pay for long-term care in an assisted living facility or at home is called the Long-Term Care Diversion Waiver. There is a waitlist for this program. In order to get on the waitlist, you will need to do the following:

  1. Call your local Area Agency on Aging and request a “screening for home and community-based services.” Each county in Florida is assigned to an Area Agency on Aging. Your local agency can be found here.

The representative will collect some preliminary information and will schedule a time for the phone screening with the individual requiring assistance, primary caregiver ,or closest family member.

  1. Complete the screening interview. The interview usually lasts about 30 to 40 minutes. The interview covers basic demographic information for the applicant, as well as information regarding the applicant’s income and assets. The interviewer will also ask about the applicant’s needs for care, including the applicant’s ability to perform Activities of Daily Living. It is important to be honest and provide the interviewer with all health and care issues no matter the extent of the issue.
  2. Following the interview, you should receive a prioritization decision. This letter indicates the applicant’s priority score, which determines their place on the waitlist. The higher the score, the higher the priority the applicant receives on the waitlist.
  3. At this point, you do not actually need to submit a Medicaid application, so you do not need to be technically asset or income qualified for Medicaid. However, it is important to have a plan in place to become income and asset qualified for Medicaid, so that you are ready to apply when the applicant receives a spot off the waitlist. If the applicants’ condition deteriorates while on the waitlist, you can request a re-assessment to move higher up on the waitlist.
  4. Once you receive notification that the applicant has received a spot off the waitlist, you will be provided with a deadline to submit the Medicaid application.

If you have specific questions regarding preserving your Medicaid eligibility, the experienced elder law attorneys of Bach, Jacobs & Byrne, P.A. are here to assist you. Call us at (941)906-1231 to set up a consultation.

June 19, 2020
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Can a Florida Nursing Home or Assisted Living Facility Take My Stimulus Check?

By Elder Law, Government Benefits, Long-Term Care

The recently enacted federal Coronavirus Aid, Relief, and Economic Security (CARES) Act provided for a direct payment of up to $1,200.00 to most taxpayers, including many residing in nursing homes and assisted living facilities. Unfortunately, the Federal Trade Commission has received several reports of nursing home and assisted living facilities requiring their residents who are on Medicaid to sign over the stimulus funds to the facility. There have been reports of facilities claiming that because the resident is on Medicaid, the facility gets to keep their stimulus payment. This claim is not true.

According to the CARES Act, the stimulus payments are a tax credit. Under the Internal Revenue Code, tax credits do not affect eligibility for federal benefits programs, like Medicaid, and they are not counted as a resource that an individual must use to pay for those benefits.

Because most nursing homes and assisted living facilities are currently closed off to the public due to COVID-19, it can be more difficult to monitor your loved one’s finances. If you are managing a facility resident’s financial affairs (such as an agent under power of attorney) or your loved one lives in a nursing home or assisted living facility and you are not sure what happened to their stimulus payment, talk to the facility’s management.

If you find out that a Florida nursing home or assisted living facility has taken your loved one’s stimulus payment, you should report it to the Florida attorney general’s office immediately and file a complaint with the Federal Trade Commission.

If you have specific questions regarding your stimulus payment and preserving your Medicaid eligibility, the experienced elder law attorneys of Bach, Jacobs & Byrne, P.A. are here to assist you. Call us at (941)906-1231 to set up a consultation.

June 8, 2020
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