You may be able to claim a tax deduction for unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income. Eligible expenses can include payments for medical and dental care, prescription medications, insulin, medical equipment and supplies, certain health insurance premiums, and transportation necessary to receive medical care. Expenses paid for yourself, your spouse or your dependents may qualify.
Keep in mind that the medical expense deduction is an itemized deduction. So to take advantage of it, you must itemize deductions on Schedule A of Form 1040 rather than claim the standard deduction. Contact your tax advisor to learn more.
On Aug. 7, the U.S. Senate passed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act. Once the President signs it into law, recipients of qualified wildfire relief will be able to exclude the payments from their taxable gross income. Qualified payments cover wildfire-related losses, expenses and damages. This tax relief will be available for disasters declared in 2015 through 2026, regardless of when the payments are received.
Once signed, the law will also allow individuals with qualified net disaster losses in federally declared zones to deduct the net amount of personal casualty loss. This provision will apply to disasters starting Dec. 28, 2019, through Dec. 31, 2026. If you have questions, your tax advisor can assist you.
Cryptocurrency holders: Be alert for a new IRS impersonation scam. Fraudsters are mailing fake IRS letters directing recipients to a bogus "Digital Asset Compliance Portal." The letters instruct recipients to scan a QR code that leads to a fraudulent website designed to look like IRS.gov. The site may ask for personal information, cryptocurrency wallet details, or exchange account credentials that criminals can use to steal identities or digital assets.
If you receive one of these letters, don't respond. Report any suspicious communication to the IRS immediately by visiting IRS.gov. If you have questions about an IRS notice or digital asset reporting, your tax advisor can help.
The IRS has issued Notice 2026-48 outlining anticipated rules for the Saver's Match program. Signed into law as part of the SECURE 2.0 Act of 2022, the program will apply to tax years beginning after Dec. 31, 2026. Eligible low- and moderate-income taxpayers may receive a federal match of up to 50% on the first $2,000 of contributions made to a qualified employer-sponsored retirement plan or IRA (up to $1,000 annually).
Taxpayers generally will claim the match on their tax return. Saver's Match will replace the Saver's Credit for qualifying retirement contributions, though the credit will remain available for Achieving a Better Life Experience account contributions.
Divorce can have important IRA tax consequences. If you're divorced or legally separated by year end, you generally can't deduct contributions you make to your former spouse's traditional IRA. Taxable alimony and separate maintenance payments typically count as compensation for IRA contribution limit purposes.
To divide IRA assets tax-free, the transfer generally must be made under a divorce or separation decree as an IRA-trustee-to-IRA-trustee transfer or transfer incident to divorce. Also, withdrawing funds from your own IRA to pay a divorce settlement may trigger income tax and, if you're under age 59½, may be subject to a 10% early distribution penalty. Need guidance? Your tax advisor can help you navigate the complexities.
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