April is always one of my favorite times of year in Texas. The bluebonnets and other flowers are in bloom, baseball is starting and the heat of summer is not yet upon us. April is also the month for Tax Day. Sometimes Tax Day sneaks up on me. Out of sight, out of mind!
Give yourself plenty of time to plan for the upcoming tax year. Excess medical expenses and being paid as an attendant from Medicaid waiver funds are two issues that many families are concerned about.
It is important to keep track of all your child’s medical expenses throughout the year. Itemizing deductions may be important if you have lots of medical expenses. If you haven’t kept track of medical expenses, it may be easier to take the standard deduction for families.
One important deduction that many families may be eligible for includes Unreimbursed Medical Expenses (UME). UMEs are expenses that are not paid by another source (i.e., Medicaid or insurance). Medical expenses must be greater than 7.5% of your adjusted gross income (AGI). So, if you earn $50,000 a year, then your UMEs must be greater than $3,750.
It’s important to keep records, this will especially be helpful to you when you’re doing your taxes. I learned to use one credit card for all medical appointments and medical-related expenses. This made it easier to figure out total expenses. I also had a folder with all the related receipts.
Mileage to doctor and therapy appointments also qualifies as a UME. I got a little notebook and put it in the car to keep track of dates, mileage and parking fees.
There are other items that you might not think of as UMEs. Some examples are tuition for private school, tutoring and travel (not meals or lodging) to attend conferences related to your child’s disability. Medically necessary updates to your home that are not covered by a Medicaid waiver may also qualify as a UME. Check with your accountant or the person who prepares your taxes to be sure.
If you are paid to be your child’s attendant, understand that this will be classified as income. Some parents are surprised when they receive the first W-2 or 1099. The tax software I use added a response for uncommon situations. There was an option to check “Nontaxable Medicaid Waiver Payments that qualify as difficulty of care payments.”
“Difficulty of care” payments are income you receive for caring for your child or an adult with a disability. You must live in the home with the person that you are caring for. The IRS has a specific Notice 2014-7 that provides guidance on this topic. When I filed my taxes last year, my tax software did not ask about this.
Your accountant may not be familiar with this IRS guidance so be sure to mention it to them. Last year, we listed the income as a negative amount in the “Other” income section and noted “IRS Notice 2014-7.” Again, your best bet is to check with your accountant or tax preparer.
Good luck and happy tax planning! You can use this search on taxes to learn more about exemptions for people with disabilities.
When my daughter was eight years old, my sister, who was a case manager for a Home and Community-based Services (HCS) program, told me to get my daughter’s name on “the list.” At that moment, I had no idea how important it would be for her future.
During the COVID-19 pandemic, we asked parents of children with disabilities and special health care needs to share their tips and stories about caring for their children during difficult times.