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My husband and I are trying to make some decisions that may…

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Hi, My husband and...

Hi, My husband and I are trying to make some decisions that may have an impact on our 2017 1040. Here is our situation: our son is at a residential facility since mid - July for PTSD (suidice) This is not covered by our insurance but we are appealing this so we may have some coverage but this is an unknown. I was researching this topic online and came to the conclusion that we may be able to deduct expenses in excess of 10% of our AGI for the year. What we want to determine: if we can deduct the full cost of the residential treatment (this includes lodging, therapy and school) , can we deduct our cost to visit him for family sessions once a month (ie travel and food expenses) We are borrowing on a 401k (as a loan repayment in 5 years) and will withdraw other monies from retirement as we need it. Our AGI last year was $85,000 (3 dependents, no itemization) We need to determine if it would be better withdraw more money by the end of this year rather than in 2018. The amounts we are taking about are currently approx $11,000/month residential treatment. Anticipate at least 6 months in 2018 at $11,000/month.

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

How much will the government take from a 401k or a IRA (plus penalties) and is one better than the other to remove monies from?

Submitted: 11 months ago.Category: Finance
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9/15/2017
Financial Professional: Tax.appeal.168, Accountant replied 11 months ago
Tax.appeal.168
Tax.appeal.168, Accountant
Category: Finance
Satisfied Customers: 4,795
Experience: Tax Accountant
Verified

Hello. Thank you for choosing this Q&A service for assistance. My name is Angela. I will be assisting you.

Do you claim your son as a dependent on your tax return? If you don't the answer is no, you can't claim any of what you mentioned. If the answer is yes, then you can claim the following expenses;

1) Cost of the residential treatment, including lodging and therapy. If the schooling is part of the treatment, and recommended by a medical doctor, then you can claim that as well. SEE BELOW:

Hospital Services

You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. This includes amounts paid for meals and lodging.

REFERENCE SOURCE:

https://www.irs.gov/publications/p502/ar02.html#en_US_2016_publink1000178945

------------------------------------

Q2: can we deduct our cost to visit him for family sessions once a month (ie travel and food expenses)

A2: No, you cannot. SEE BELOW:

Trips

You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals aren't included.

Lodging

You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. See Nursing Home , later.

You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. You can include the cost of such lodging while away from home if all of the following requirements are met.

REFERENCE SOURCE:

https://www.irs.gov/publications/p502/ar02.html#en_US_2016_publink1000179026

---------------------------------------

Q3: We need to determine if it would be better withdraw more money by the end of this year rather than in 2018.

A3: As a 401k loan is not considered income and is not taxable if repaid, it doesn't matter if you withdraw the money this year or next year.

---------------------------------------------

Q4: How much will the government take from a 401k or a IRA (plus penalties) and is one better than the other to remove monies from?

A4: 401k and IRA distributions are taxable as ordinary income in the year the distribution is taken. Early withdrawal penalties are 10%. In some cases, the 10% early withdrawal penalty can be waived. For a 401k hardship withdrawal, refer to the following link;

https://www.bankonyourself.com/401k-withdrawal-rules

For detailed information on exceptions to tax on early distributions, refer to the following link;

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions

Let me know if you need further clarification with this matter. If I have answered all of your questions, I ask that you be so kind as to take the time and scroll to the top of the page and select 3 or more stars to positively rate my response so that I can receive credit for assisting you. Thank you in advance.

  1. The lodging is primarily for and essential to medical care.

  2. The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital.

  3. The lodging isn't lavish or extravagant under the circumstances.

  4. There is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

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Customer reply replied 11 months ago
Hi Angela, Thank you for the information. 2 followup confirmations: After looking at this information it looks like we could take a deduction for us traveling to take our son to the residential facility (1st time)and if he is returned after a home visit if we are traveling with him. (not the part for us to take him to our home just the expenses to initially get him there or for us to return him there.)I also was looking at the education piece and from this info assume that the school he is doing while at the facility may be deductible: Special Education
You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders.You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. For expenses to be deductible, a doctor must recommend that the child attend the school. Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Special education includes:Teaching Braille to a visually impaired person,Teaching lip reading to a hearing disabled person, orGiving remedial language training to correct a condition caused by a birth defect.You can't include in medical expenses the cost of sending a child with behavioral problems to a school where the course of study and the disciplinary methods have a beneficial effect on the child's attitude if the availability of medical care in the school isn't a principal reason for sending the student there.
Financial Professional: Tax.appeal.168, Accountant replied 11 months ago

Hello again,

You are welcome.

1) After looking at this information it looks like we could take a deduction for us traveling to take our son to the residential facility (1st time)and if he is returned after a home visit if we are traveling with him. (not the part for us to take him to our home just the expenses to initially get him there or for us to return him there.)

A1) Please clarify what you mean by...return him there. Once he is in the facility, you are not able to deduct expenses for taking him home on a home visit and taking him back. If the trip was the first time that he was going to the facility, then yes, the travel expenses would be deductible, but as he is already there, the trip expenses are not deductible.

----------------------------------

2) Regarding the schooling, again, if the schooling is deemed part of his treatment and recommended by a medical doctor, you can deduct those expenses.

Let me know if the information provided clarifies matters for you. If so, a 3 or higher star rating to positively rate my response is appreciated.

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Financial Professional: Tax.appeal.168, Accountant replied 11 months ago

Hello again,

I am checking with you to see if you require additional information relating to this matter. If not, I ask that you be so kind as to select 3 or more stars to positively rate my response so that I can receive credit for assisting you. Thank you in advance.

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