LOCK IN 2012 MEDICAL DEDUCTIONS

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Asyou probably already know, medical expenses can be deducted on Schedule A ofyour 2012 Form 1040 only to the extent that the total allowable expenses forthe year exceed 7½% of your Adjusted Gross Income (AGI).  If your AGI is $70,000 and your medicalexpenses total $6,000 you get a tax deduction of $750.  If your expenses total $5,000 you get no taxbenefit.
Butdid you know that beginning with tax year 2013 the AGI exclusion increases to10% for taxpayers under age 65?  In theabove example there would be no tax deduction if your total expenses for 2013totaled $6,000.  Taxpayers age 65 andolder can continue to use the 7½% exclusion rate through tax year 2016. 
Theincrease comes via the Patient Protection and Affordable Care Act signed intolaw in March of 2010.   
Ifyou expect to be able to itemize on your 2012 Form 1040 here is what you shoulddo.  Sit down and estimate what your AGIwill be for 2012.  Then add up all ofyour qualified medical expenses to date. If your expenses come close to, or already exceed, the projected 7½% ofAGI exclusion you should incur as many allowable medical expenses between nowand the end of December.
Schedulemedical and dental check-ups and procedures, renew prescriptions, purchasemedical supplies, pre-pay related insurance premiums, and pay any outstandingbalances.  If you do not have the cashavailable to pay for the accelerated medical expenses you can charge them to abank credit card.
Whenadding up medical costs be sure to include travel to and from doctors, dentists,therapists, treatments, etc., using the standard mileage allowance of 23 centsper mile if you drive.
Theincreasing AGI limitation on medical deductions makes it even more important toseriously consider participating in an employer-sponsored medical FlexibleSpending Account.  FSA contributionseffectively provide an “above-the-line” income tax deduction for qualifiedmedical expenses from dollar one.  Andthey can reduce your Social Security and Medicare tax liability as well.
Unfortunately,also thanks to the healthcare reform Act, effective with tax year 2013 you willbe able to put aside only $2,500 per year, indexed annually for inflation, in aFlexible Spending Account.
Onecaveat – under the Alternative Minimum Tax medical expenses are already subjectto a 10% of AGI exclusion.
TTFN