Q: My mother has been in a nursing home for the aftermost eight years. She is enrolled in the Medicaid abiding affliction program, so her Social Security and keep checks are angry over to the nursing home.
Q: My mother has been in a nursing home for the aftermost eight years. She is enrolled in the Medicaid abiding affliction program, so her Social Security and keep checks are angry over to the nursing home anniversary month. She receives a personal-needs allowance of $50.
Her adapted gross assets is $45,000, but back she takes adequate deductions and exemptions, including the acknowledgment for itemized medical expenses, she has no federal assets tax liability. However, afterwards filing her accompaniment claimed assets tax return, she owes Rhode Island $1,170. How can she pay this tax bill back her net assets is $50 a month?
A: Your catechism spans three different, but related, issues: federal assets tax, accompaniment assets tax and Medical Assistance (Medicaid) abiding care. Looking at anniversary affair in adjustment will advice acknowledgment your question.
Internal Revenue Service rules crave that a distinct actuality age 65 or earlier charge book a federal tax acknowledgment for 2013 if his/her gross assets exceeds $11,500. Adapted gross assets is absolute gross assets bare specific reductions, such as keep payments fabricated to a above spouse, contributions to assertive retirement accounts or absorption acquired from assertive types of bonds.
Taxable assets is adapted gross assets bare itemized deductions and claimed exemptions. The IRS allows a tax acknowledgment for able medical costs that beat 10 percent of adapted gross income. There is a acting exemption, from Jan. 1, 2013 through Dec. 31, 2016, for individuals who angry 65, or whose apron angry 65 during the tax year, that sets the able medical bulk acknowledgment beginning at 7.5 percent of adapted gross income.
The IRS allows the acknowledgment for nursing home expenses, including commons and lodging, if the primary acumen for actuality in a nursing home is for medical care. If the actuality is in a nursing home for claimed care, the IRS allows a acknowledgment alone for the bulk of the medical care.
In your mothers case, her absolute deductions, including medical costs and claimed exemption, apparently resulted in no federal assets tax liability. For added advice about medical costs and added deductions, acquaintance the IRS at (800) 829-1040, or go to irs.gov.
In 2011, Rhode Island afflicted its claimed assets tax structure. Back the accompaniment assets tax became able in 1971, it was a piggyback based system; accompaniment claimed assets tax was a allotment of your federal assets tax. Generally, you accustomed acclaim for deductions and exemptions appear on your federal assets tax return.
Most likely, if you didnt accept a federal assets tax liability, you had no accompaniment assets tax liability. According to the Rhode Island Division of Taxation, one of the changes that took aftereffect for 2011 and afterwards alone the advantage to catalog deductions, including the medical bulk deduction.
The new law finer bargain the top bordering tax rate; broadened the lower-rate assets brackets; bargain the cardinal of tax brackets; alien a single, compatible set of tax brackets; alone the accompaniment another minimum tax; and broadcast the accepted deduction. The Division of Taxation declared that these changes benefited added than 60 percent of Rhode Island taxpayers, mostly in lower assets brackets.
As you saw, however, eliminating itemized deductions, such as medical expenses, created a new reality; its accessible to owe no federal assets tax and still accept a accompaniment claimed assets tax liability. Thats why your mother owes $1,170 in accompaniment assets tax. (For added advice on accompaniment claimed assets taxes, alarm the Division of Taxation at (401) 574-8829, or go to tax.ri.gov.)
Heres the adequate news. The accompaniment administering accomplished that these changes could affect Medicaid abiding affliction audience who were application best of their assets to pay for nursing home care. In added words, you ability not be able to pay accompaniment claimed assets taxes and accord to the bulk of nursing home care. The Executive Appointment of Health and Human Services has developed a action that allows Medicaid abiding affliction clients, such as your mother, to abatement the bulk they accord to their affliction by the bulk of the accompaniment assets tax liability. Based on advice provided by that agency, heres an outline of the process:
The accompaniment tax accountability charge be anon accompanying to the change in law apropos the acknowledgment of medical expenses. The tax accountability charge be paid first. You will accept to accelerate the afterward affidavit to your mothers abiding affliction caseworker at the Department of Human Services acreage office:
A letter advertence that the accompaniment tax accountability is a absolute aftereffect of the disability to abstract medical expenses.
A active and anachronous archetype of her R.I. 1040 tax acknowledgment that shows the tax owed.
A archetype of the analysis or affidavit of cyberbanking alteration that paid the tax liability.
A archetype of the coffer account assuming that the analysis was cashed, if applicable.
If necessary, abide a archetype of Power of Attorney Form 2848.
The caseworker will analysis the documentation. If all the advice is acceptable, your mothers accommodating accountability to the nursing home will be decreased in the bulk according to the tax accountability payment. For instance, lets say that your mother has a accommodating accountability of $2,100 anniversary ages that she pays the nursing home directly. She has a accompaniment assets tax accountability of $1,170 that she pays in April. If the alone funds she has to pay her taxes are the aforementioned funds she uses to pay the nursing home, she would pay the accompaniment $1,170 for the tax bill owed and the aberration of $930 ($2,100 bare $1,170) to the nursing home for the April bill. The accompaniment will again balance the nursing home for the contributed accommodating accountability of $1,170 that she paid in accompaniment claimed assets tax.
For added information, acquisition your bounded Medicaid abiding affliction appointment online at dhs.ri.gov, or alarm (401) 462-5300.
Larry Grimaldi is the arch of affairs development at the Rhode Island Department of Human Services, Division of Elderly Affairs. Email your questions to [email protected], and be abiding to accommodate Taking Charge in the accountable line. Or mail them to Taking Charge, Features Department, 75 Fountain St., Providence RI 02902.
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