Mary Beth, Timonium: We had a health care spending account in 2007. We spent the entire $5,000 balance and had other health expenses beyond the $5,000 cap. If we itemize deductions, what portion if any out of pocket are eligible for deduction?
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Jim Wilhelm, a partner with SC&H Group, leads the income tax department, providing tax compliance and consulting services to private and public companies throughout the region.
Another option is to itemize those qualified medical expenses in excess of the HSA. The downside to itemizing is that those expenses are still subject to the 7.5% adjusted gross income (AGI) limitation. If you itemize those expenses, then the above option does not apply. However, the first option provides a dollar for dollar tax-free benefit to the taxpayer.
Lynette, Brainard, Minn.: Does a person have to file taxes if their earned income was only $1,300?
SC&H Group: Generally if an individual's gross income does not exceed the limits set by the IRS, the individual is not required to file. For example, if you are single and your 2007 gross income does not exceed $8,750, you do not need to file a federal income tax return. However, you may consider filing a tax return to receive a refund of those federal (and state) taxes withheld from your earnings. Also if you are eligible for certain refundable tax credits, such as the earned income credit or additional child tax credits, you may want to consider filing your tax return.
For a detailed listing of the different income limits based on filing status please refer to the filing instructions for Form 1040 on the IRS Web site, www.irs.gov.
Paula, Memphis, Tenn.: Will the upcoming tax rebates be taxable??
SC&H Group: The recovery rebate credit, like other refunds, credits or offsets of federal income taxes, is not included in income. Therefore, the rebate is not taxable. When you receive the rebate, you should keep a copy of the IRS letter listing the amount of your payment for when you file your 2008 return next year. For further information on the Economic Stimulus Payments please refer to the IRS website, www.irs.gov, under 1040 Central's latest updates.
Answers to selected questions are published in The Sun's Money & Life section on Sundays and online on Mondays.