Making Tax Time a Little Bit Easier

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Seniors may not be aware of all the income tax deductions available. Now that it’s tax season, we offer some tips for reducing your tax burden as well as where to find some free neighborly help. Click here to view article.

Making Tax Time a Little Bit Easier

It’s that time of year again, a time of teeth-gnashing and pencil-crunching, as we haul out our receipts and statements from last year and prepare to do our federal income tax returns. As tax deadline approaches, you may not be aware of all the deductions available to seniors or that free tax help is available in your neighborhood.

Medical and Dental Expenses

When you were younger, you might not have had enough medical expenses to make it worthwhile to itemize your deductions on Schedule A and instead took the standard deduction. However, increased age not only brings more wisdom but more medical issues and expenses. One estimate is that as much as 30 percent of a senior’s income is allocated to health care costs.

Not all of those costs are covered by your insurance plan or Medicare. In fact, the list of deductible medical and dental issues is exhaustive. For instance, you can deduct the cost of acupuncture, stop-smoking clinics and contact lenses (see sidebar). Other deductibles are health insurance premiums (including Medicare premiums), long-term care insurance premiums, prescription drugs, nursing home care and most other out-of-pocket heath care expenses.

You must include only the medical and dental expenses you paid this year, regardless of when the services were provided. That is, if you bought new glasses last year, but didn’t get the bill until this year, you won’t be able to deduct it until your 2013 taxes come around. And these are only for expenses you paid yourself; if the insurance company paid the tab, you can’t take the deduction.

Medical and dental expenses must exceed 7.5 percent of your adjusted gross income (AGI) in order to qualify for a deduction; this increases to 10 percent for 2013, making it more difficult to access next year. Similarily, itemized deductions will be subject to phase-outs beginning in 2013. For example, if your AGI was $100,000 in 2012, only your medical expenses above $7,500 (7.5% x $100,000 = $7,500) would be deductible. If you had $10,000 in medical expenses in 2012, you could deduct only $2,500 ($10,000 – $7,500).

Standard Deductions for Over 65

Even if you don’t itemize your deductions, if you are 65 or older by Dec. 31 of the tax year, you can take a standard deduction for your age. Single people over 65 can claim $1,450, while married people can take an extra $1,150 for 2012. You can also claim the higher deduction if only your spouse is older than 65 and you file a joint return. You qualify for a higher standard deduction if you are totally or partially blind—that is, you do not have corrected vision of at least 20/20 or you have an extreme limitation in your field of vision. These standard deductions will increase in 2013.

Retirement Plans

Another gift from the government is higher contribution limits for retirement plans (again, increasing in 2013). Once you turn 50, you can contribute more to an IRA, Roth IRA or 401(k). This means socking away more money in an IRA without having to pay taxes on it. (With the Roth IRA, you pay taxes upfront instead of when you withdraw, meaning that any interest earned is tax-free). For example, a married couple over 50 can contribute as much as $12,000 to an IRA and deduct the amount from their income tax.

Further, interest, dividends and investment capital gains are taxed at a lower rate than other income, typically 15 percent, and are not subject to Social Security or Medicare taxes. In 2013, income from such gains will be taxed at higher rates for high-income seniors, who will also see a higher effective Medicare tax rate.

You may also be able to include investment-related expenses (such as investment advice, fees for a safe deposit box and subscriptions to investment newsletters) that exceed 2 percent of your AGI in your other itemized deductions.

Home Sale

You may be thinking of downsizing into something more manageable or maybe escaping to a warmer climate. If you sell your home, you may not have to pay taxes on any profit made from your home’s sale if you lived in your home for at least two of the five years prior to selling it. Tax laws allow a single filer to claim, with no taxes, up to $250,000 in profit on a home sale, and up to $500,000 for a married couple filing together.

Paying Taxes on Social Security

Don’t forget that if you made substantial income while collecting Social Security, you may have to pay taxes on that income. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits. Internal Revenue Service (IRS) rules state that no one pays federal income tax on more than 85 percent of his or her Social Security benefits.

The Social Security website advises that if you file either an individual tax return or joint return, and your combined income (that is, your adjusted gross income plus nontaxable interest plus one-half of your Social Security benefits) is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits. If your combined income is more than $34,000, up to 85 percent of your benefits may be taxable.

To let you know your Social Security earnings, each January the government will send out a Social Security benefit statement (Form SSA-1099) showing the amount of benefits you received in the previous year. If you do have to pay taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

Help Is Around the Corner

Finally, if you find yourself getting grouchy about all the details and complex instructions for your taxes, you can find free help through the AARP Foundation. Tax-Aide is a free tax preparation service for people 60 and older with low to middle incomes.

In 2010, about 35,000 Tax-Aide volunteers prepared 2.6 million tax returns at thousands of locations across the country. Courtesy of the IRS, the software allows preparers to file electronic federal and state returns free of charge (New York Times: the New Old Age, “A Few Tax Tips for the Elderly,” March 18 2011).

Most cities offer free assistance (subject to income limits) through Volunteer Income Tax Assistance programs.

Sources:

Nolo.com: http://www.nolo.com/legal-encyclopedia/top-tax-deductions-seniors-retirees-29591.html

ehow.com: http://www.ehow.com/list_7433134_tax-deductions-seniors.html

FindLaw: http://tax.findlaw.com/federal-taxes/top-seven-senior-tax-breaks.html

Medical Expenses That Can Be Deducted

The IRS provides a long list of medical expenses that are deductible. While we provide a few here, to see the total list, go to IRS Publication 502, Medical and Dental Expenses.

• Acupuncture
• Alcoholism treatment
• Ambulance
• Annual physical examination
• Artificial limb
• Artificial teeth
• Body scan
• Braille books and magazines
• Capital expenses—equipment installed in a home for medical purposes
• Chiropractor
• Contact lenses
• Dental treatment
• Diagnostic devices used in diagnosing and treating illness and disease
• Eye exam
• Eyeglasses
• Eye surgery
• Hearing aids
• Home care
• Insurance premiums
• Laboratory fees
• Lifetime care—advance payments
• Long-term care
• Medicines
• Nursing home
• Nursing services
• Operations
• Osteopath
• Oxygen
• Psychiatric care
• Stop-smoking programs
• Surgery
• Transplants

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Changes Could Improve Medicare and Seniors’ Health

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The Affordable Care Act not only starts to close the “donut hole” in Medicare for drug costs but pays for certain preventive care measures and screening. Click here to view article.

If you’ve been frightened by all the gloom and doom talk in Washington about the future of Medicare, the good news is that the Affordable Care Act (ACA) actually strengthens the health care program for seniors and offers preventive services that should boost your health. The act also starts to close the so-called and much maligned “donut hole” for prescription drug costs, which should boost your pocketbook.

By pledging to reduce waste, fraud and abuse, and slow Medicare cost increases, the ACA also extends the life of the Medicare Trust Fund, which manages Medicare, from 2016 to 2024. The ACA makes other promises to ease fears about Medicare. Traditional Medicare-covered benefits cannot be reduced or taken away, and Medicare Advantage Plans, which are private insurance plans, must continue to provide traditional Medicare benefits. Further, Medicare spending reductions should not result in rationing care, reducing or changing benefits or eligibility, or increasing co-pays or premiums.

Among other reforms, the ACA intends to provide hospitals with new incentives to improve the quality of care and, starting in 2014, to offer additional protections for Medicare Advantage plan members by taking steps that limit the amount these private plans spend on administrative costs, insurance company profits and services other than health care.

Closing the Drug “Donut Hole”

Before the ACA, as a result of the infamous Medicare Part D “donut hole,” or coverage gap, Medicare recipients received assistance paying for medications only up until a certain dollar amount and then had to pay for drugs out of pocket until they reached another dollar amount. The ACA closes the donut hole over the next 10 years and provides financial help until the gap is fully closed. In June 2010, the government mailed $250 rebate checks to help seniors pay for their medications, and in 2011, seniors received a 50 percent discount on approved brand-name prescription drugs. While in the donut hole, seniors also get a 7 percent discount on generic drugs. In 2013, the Part D coverage gap starts at $2,970 and extends to the catastrophic coverage threshold of $4,750.

While in the coverage gap here’s what you’ll pay for drugs up until 2020, when the gap is closed.

• 2013: 47.5% for brand-names and 79% for generics
• 2014: 47.5% for brand-names and 72% for generics
• 2015: 45% for brand-names and 65% for generics
• 2016: 45% for brand-names and 58% for generics
• 2017: 40% for brand-names and 51% for generics
• 2018: 35% for brand-names and 44% for generics
• 2019: 30% for brand-names and 37% for generics
• 2020: 25% for brand-names and 25% for generics

Preventive Services

To improve seniors’ overall health, under the ACA, Medicare allows a free annual wellness exam and covers certain preventive services, such as nutrition therapy, without charging the Part B coinsurance or deductible.

As of 2012, the annual wellness visit benefit includes the following services:

• Routine measurements, such as height, weight, blood pressure, and body mass index
• Review of individual medical and family history
• Review of the beneficiary’s medications, supplements and vitamins
• Discussion of care from other health care providers
• Review of functional ability and level of safety (for example, risk of falling at home), including any cognitive impairment, as well as a screening for depression
• Personalized health advice that takes into account risk factors and specific health conditions or needs, including weight loss, physical activity, smoking cessation, fall prevention and nutrition
• Referrals to other appropriate health education or preventive counseling services that may help minimize or treat potential health risks

Under the ACA, Medicare covers many preventive services, including counseling for tobacco-use cessation, whether or not you have been diagnosed with an illness caused or complicated by tobacco use. (However, if you have been diagnosed with a tobacco-related illness, the co-insurance and deductible will apply.) See sidebar for a list of services and screenings that Medicare covers.

You may have to pay co-insurance for the office visit when you get these services. If you’re in a Medicare Advantage Plan, check with your plan to see if these benefits will also be free for you.

Other Provisions of the ACA

Medicare fraud, including billing seniors for services that weren’t performed, can cost billions of dollars each year. To fight this waste of money, the ACA allocates $350 million to fight fraud as well as provisions that go after those who defraud the system.

The ACA also protects the society’s most vulnerable. The Elder Justice Act, part of the ACA, provides approximately $500 million (of $770 million for the act) from 2010 to 2014 for adult protective services. The federal government provides previously unavailable support and resources for state-based adult protective services and prosecution of crimes against the elderly. The act also addresses nursing home care, requiring skilled nursing facilities under Medicare and nursing facilities under Medicaid to disclose information regarding ownership, accountability requirements and expenditures. Such information will be standardized and published on a website so that Medicare enrollees can compare nursing facilities.

Future of Medicare

While Medicare seems secure for now, the future could bring serious conflicts: the government’s attempt to rein in the budget, rising health care costs, baby boomers reaching Medicare age and a dwindling pool of younger people to pay for Social Security and Medicare.

Some options to maintain Medicare include raising Medicare premiums and co-pays for higher income beneficiaries and/or raising premiums for everyone. Other ideas under consideration are requiring drug companies to give rebates or discounts to Medicare, increasing co-pays and out-of-pocket costs for home health care and nursing homes and generating new revenue by increasing payroll taxes.

However, Harry (Rick) Moody, director of academic affairs for AARP in Washington, D.C., says the question is, “What is your goal? To save money or make people healthier?”

AARP’s view is that it’s possible to save money in the Medicare system. “We can do that in ways that don’t harm beneficiaries but benefit them,” for example, reduce “revolving door” hospital discharge plans, where people are prematurely discharged, get sick and are readmitted again.

Other ways to decrease Medicare costs are to reduce medical errors and eliminate procedures such as surgeries and screenings that have no benefit, he says. By reducing costs, health care can also improve.

In the United States, two of the biggest problems with health care are overtreatment and wrongful treatment, Moody says. “The harm caused by overtreatment is endemic in the health care system.” For example, many heart patients are advised to take aspirin to prevent strokes, but aspirin can cause macular degeneration, and some biopsy procedures have risks. “People are not adequately apprised of risk potential.”

At the same time, the ACA takes a big step toward preventing serious and costly illnesses, such as breast cancer or diabetes, by including preventive measures in its coverage. In fact, the Independent Payment Advisory Board created by the ACA, consisting of 15 medical experts (nominated by the president and approved by the Senate), could be part of the discussion. If Medicare spending exceeds the growth rate of the economy plus one-half percent, the board must make recommendations to reduce spending.

Whatever happens with the budget discussion, Medicare, at 21 percent of the budget in 2011 (along with Medicaid and the Children’s Insurance Program), will be part of the debate.

Sources:

“Seniors and the Affordable Care Act,” webinar for Society for Certified Senior Advisors,® Jan. 24, 2013, by Robert Semro, policy analyst for Bell Policy Center, http://www.csa.us/AffordableCareAct

Healthcare.gov: http://www.healthcare.gov/law/information-for-you/seniors.html

How Stuff Works: http://people.howstuffworks.com/5-ways-seniors-benefit-from-affordable-care-act.htm

Preventive Services Covered by Medicare

Under the ACA, these services are covered by Medicare Part B (medical insurance):

• Abdominal aortic aneurysm screening
• Alcoholism treatment
• Alcohol misuse screenings and counseling
• Bone mass measurements (bone density)
• Cardiovascular disease screenings
• Cardiovascular disease (behavioral therapy)
• Colorectal cancer screenings
• Depression screenings
• Diabetes screenings
• Diabetes self-management training
• Glaucoma tests
• HIV screenings
• Mammograms (screening)
• Nutrition therapy services
• Obesity screenings and counseling
• One-time “Welcome to Medicare” preventive visit
• Pap tests and pelvic exams (screening)
• Prostate cancer screenings
• Sexually transmitted infections screening and counseling
• Shots: flu, hepatitis B, pneumococcal
• Tobacco use cessation counseling
• Yearly wellness visit

Source: Medicare.gov

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“I believe the tools necessary to prevent Alzheimer’s disease are within reach.”
That’s a bold statement, but world–renowned researcher David Morgan, Ph.D., has every confidence in his prediction.
Dr. Morgan’s research interests are aging and brain function, focusing on drugs to treat the form of dementia called Alzheimer’s disease. He is a recipient of multiple grants from the Alzheimer’s Association and other prestigious grantors like the National Institutes of Health.
Although the pace of research is accelerating, much needs to be done to address the severity of the Alzheimer’s epidemic.
Ninety percent of what we know about Alzheimer’s has been discovered in the last 15 years. Some of the most remarkable progress has shed light on how Alzheimer’s affects the brain, thanks to dedicated researchers like Dr. Morgan. His team is now targeting the tangles of proteins called tau that build up inside brain cells more rapidly in people with Alzheimer’s than in the general population.
Dr. Morgan is one example of how our International Grant Research Program support some of the most important research threads in Alzheimer’s science. These threads move the field forward by:

• Contributing to knowledge about Alzheimer’s
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• Yielding clues to causes and treatments

Because new treatments take years to produce—and because drugs that seem promising in early–stage studies may not work as hoped in large-scale trials— it is critical that Alzheimer’s research continues to accelerate.
Dr. Morgan’s commitment to the fight against Alzheimer’s and dementia gives us all reason to hope — for answers, for treatments and ultimately, for a cure. Please take a moment to read Dr. Morgan’s message and help us move the fight forward.

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Our 24/7 support services are here for you year-round

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Changes in a loved one may create concerns that they have Alzheimer’s disease. Care consultants at the Alzheimer’s Association’s 24/7 Helpline can answer your questions and offer reliable information and support year-round. ALZConnected^®, our online community, also provides a place to find support and to share your thoughts and experiences.
Learn more about our Helpline (800.272.3900) >>
Visit ALZConnected >>

The Alzheimer’s Association 24/7 Helpline provides reliable information and support to all those who need assistance. Call us toll-free anytime day or night at 1.800.272.3900.

Our 24/7 Helpline serves people with memory loss, caregivers, health care professionals and the public.

Our highly trained and knowledgeable staff can help you with:

• Understanding memory loss, dementia and Alzheimer’s
• Medications and other treatment options
• General information about aging and brain health
• Skills to provide quality care and to find the best care from professionals
• Legal, financial and living-arrangement decisions

Our 24/7 Helpline also features:

• Confidential care consultation provided by master’s level clinicians who can help with decision-making support, crisis assistance and education on issues families face every day
• Help in a caller’s preferred language using our translation service that features over 170 languages and dialects
• Referrals to local community programs, services and ongoing support

Call us 24/7: 1.800.272.3900
TDD: 1.866.403.3073

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Exercise in mid-life may help lower Alzheimer’s disease risk

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Being physically fit in your 40s may help lower your risk of Alzheimer’s disease and other dementias later in life, a new study suggests. Nearly 20,000 healthy study participants took a treadmill test to measure their fitness levels when they were middle-aged. Those deemed physically fit via the treadmill stress test were found during follow-up to be less likely to develop dementia after age 65 than those who were less fit.
Read the article >>
Learn more about the brain and physical activity >>

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