Older Non-Dependent Child Medical Expenses

[tpert]

I am trying to make some sense of the current rules for medical expenses for an older child.

It is my understanding that employers must offer coverage for an employee's children even if they are not dependents through the end of the calendar year in which they turn 26, even if the dependent is married and regardless of whether the dependent resides with, or is financially dependent on, the covered employee. This applies also to a Flexible Spending Account.

My understanding is that while a self-employed individual might be likewise eligible for a Self-Employed Health Insurance deduction, there would be no analogous deduction for this health insurance on Schedule A for the cost of that insurance unless the child is actually a dependent.

Likewise, any other medical expenses attributable to that non-dependent older child may be eligible for reimbursement from a Flexible Spending Account, but those same expenses if paid with post-tax funds, would not be deductible. If a taxpayer has both a Flexible Spending Account and sufficient Medical Expenses to itemize, it seems that the proper strategy would be to pay for older non-dependent expenses with the Flexible Spending Account since they would not be eligible for Schedule A.

However, I came across this article from the CCH Whole Ball of Tax for 2011 which confuses me:

http://www.cch.com/wbot2011/014Sandwich.asp

Perhaps I am reading it wrong or there is some error in the article. It seems to imply that medical expenses of older non-dependent children are able to be claimed on Schedule A.

Thanks.

[Gary2]

My bet is that the article is wrong. Pub 969 mentions the higher age limit for FSAs, but Pub 502 doesn't mention an analogous limit for Sch. A deductions.

[Nashville]

The Kite Won't Fly

through the end of the calendar year in which they turn 26,

I don't claim to know a lot about this, but I believe the "plan year" should be substituted for "calendar year" in the above statement.

Also, just knowing the mentality of the framers of the Obamacare legislation, I don't believe they would have gone out of their way to provide a Schedule A deduction for ANY non-dependent. Although they did jump at the chance to raise taxes, creating more tax breaks was definitely not in their agenda.

They would have had to allow for this specially, as prior to Obamacare, there was no deduction on Schedule A for a non-dependent. However, if the age 26 coverage results in additional section 125 employee contributions, I believe the additional deduction from W-2 wages would stand the test.

[Gary2]

Actually, there are two long-standing exceptions to the usual dependency rules for medical deductions, one sort of obvious, one much less obvious.

And while the PPACA does include a variety of new taxes and indirect increases, it also includes a number of reductions, such as the small business credit (to help establish health plans) and the temporary credit for investment in new therapies.

[erchess]

non dependent medical expenses Sch A

If the sole reason the child cannot be a dependent is that they have too much gross income their medical expenses including insurance may be deducted on Sch A. That rule has been around for a long long time.

[Golden Rocket]

Real-World Grandstanding

And while the PPACA does include a variety of new taxes and indirect increases, it also includes a number of reductions, such as the small business credit (to help establish health plans) and the temporary credit for investment in new therapies.

I've heard more speeches from politicians about the wonderful new small business credit than any benefit that can be actually realized. When you try to apply it (I've tried four times in two years), you find out that between the phaseouts and other limits, the credit is next to worthless. The real-world result of the bill is that more companies will be striving to wiggle in under the 50-employee limit than ever before to bail out of having to provide insurance.

"Striving to wiggle in" as referenced above means any combination of laying off people, refusing to hire people, and converting full-time employees to part-timers.

Credit for investment in new therapies will prove to be as beneficial to the economy as the orphan drug credit.

Sorry to sound cynical folks, but I live and survive at the grass roots -- and I just can't see the PPACA as showers of blessings.