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Susan Tompor: Tax breaks available for teachers with COVID-19 expenses, those with high medical bills

Susan Tompor, Detroit Free Press on

Published in Home and Consumer News

Going forward, the Biden administration issued new federal guidance in early 2021 that removed some barriers to testing and clarified that insurers must cover testing without cost sharing for asymptomatic individuals and without requiring medical screenings.

Patients also could still end up with out-of-pocket expenses due to deductibles and unreimbursed expenses under their health insurance plans.

"COVID-19 diagnostic tests ranged from $20 to $850 per single test, not including the price of a provider visit, facility fee, specimen collection, or any other test that may have been included during testing," according to the Peterson-KFF Health System Tracker.

"These services may be covered by insurance, but it is not guaranteed for all patients."

The costs can skyrocket for COVID-19 cases that require hospital care to anywhere from $20,000 to $88,000 or much more, depending on the length of stay and other factors. Such estimates from Peterson-KFF are based on the cost of care for people with employer coverage — and they wouldn't reflect what someone with private insurance would have to pay out of pocket. It’s those out of pocket expenses that could be tax deductible.

If you are hospitalized for treatment related to COVID-19, H&R Block's Flores said it’s likely all of your expenses would be deductible medical expenses. Check your insurance policy and coverage to find out what expenses were covered by your insurance.

When can you claim medical expenses?

Generally, Flores noted, medical expenses are deductible in the year the medical provider is paid, regardless of when the services were provided.

"If you pay for medical treatment using a credit card, you deduct the expenses in the year you paid the provider with the credit card, not as you pay your credit card bill," Flores said.

Claiming the medical deduction isn't easy for many taxpayers.

If you have $50,000 in adjusted gross income, for example, you'd need at least $3,750 in qualifying medical expenses during 2020 to hit the threshold. And only expenses after that amount would qualify for a deduction.

So, if you had $5,000 in qualifying expenses in this example, you'd be able to claim $1,250 in deductions for medical expenses.

The higher your adjusted gross income, the tougher it could be to claim many medical expenses.

But here's another point: You must have enough other deductions, such as charitable contributions, mortgage interest, state and local taxes, to itemize and exceed the standard deduction.

 

The standard deduction is $12,400 in 2020 for single taxpayers and married individuals filing separately. That's up $200 from 2019.

The standard deduction for married filing jointly is $24,800 for tax year 2020, up $400 from 2019.

For heads of households, the standard deduction is $18,650 for tax year 2020, up $300.

Age matters: There's an additional standard deduction for married taxpayers 65 or over or blind of $1,300. For a single taxpayer or head of household who is 65 or over or blind, the additional standard deduction for 2020 is $1,650.

If someone is both 65 or older and blind, the additional deduction amount is doubled.

The Internal Revenue Service has an online tool called the Interactive Tax Assistant, which can help you research the question: "How Much Is My Standard Deduction?"

About 87% of the 153.7 million filers in tax year 2018 took the standard deduction, according to the Tax Foundation.

The Tax Cuts and Jobs Act of 2017 nearly doubled the amount of the standard deduction and put new limits on some itemized deductions, including deductions for state and local taxes paid and mortgage interest. The individual income tax changes are scheduled to expire after Dec. 31, 2025.

The tax changes led to a 58% drop in the number of people who itemized on 2018 returns, compared with 2017 returns. About 46.5 million tax filers itemized in 2017 vs. 19.5 million on 2018 returns.

When it comes to medical expenses, tax filers need to realize that any expenses that you covered out of money in a health savings account or health flexible spending account would not be deductible on your federal income tax return.

"In other words, you can’t double dip," Flores said.

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