Tax Q&A: How to avoid penalties on estimated taxes
USA TODAY readers submitted tax questions, and here are the answers from members of the American Institute of Certified Public Accountants.
Q: Are costs from an auto accident that was ruled not my fault deductible? The offending party and/or his insurance company has not paid for medical costs due to the lack of insurance or ability to pay. I have over $20,000 dollars which I paid in 2012. Thanks
A: The Internal Revenue Code does provide for a deduction for medical expensesincluding costs associated with an accident like yours. Sorry to hear that you had an auto accident with injuries that required medical attention. You can deduct all of your medical expenses incurred during a tax year that exceed 7.5% of your adjusted gross income if you are itemizing.
For example, let’s say that your adjusted gross income for the year is $80,000. That would mean the threshold for you to have the benefit of deducting your medical expenses would be $6,000, ( $80,000 x 0.075). So the first $6,000 of your $20,000 of expenses would not be deductible, but the remaining $14,000 would.
Added to these costs could be other medical expenses such as co-pays, dental, optical, prescriptions, physical therapy and most other health-related costs. You would add the deductible medical expenses to your other itemized deductions such as mortgage insurance, real estate taxes, state and local income taxes, and charities to determine the total itemized deductions that you would claim.
Karl L. Fava, CPA Business Financial Consultants, Dearborn, Mich.
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