StevenL Posted March 5, 2017 Report Share Posted March 5, 2017 I think I know the answer to my question already but I figured I would put it on here and see if anyone with more knowledge than me would have a different answer. Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000). Is there anyway she can exclude all or some of the income on her tax return? If not she she will have a hefty tax bill to deal with. Thanks for your help. Quote Link to comment Share on other sites More sharing options...
NECPA in NEBRASKA Posted March 5, 2017 Report Share Posted March 5, 2017 Unless she had more medical expenses, I don't know how she could exclude any of the interest income for a federal return. I know that there are some bonds that you pay tax on the interest annually, but it doesn't sound like these are those kinds of bonds. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 5, 2017 Report Share Posted March 5, 2017 Are you sure that's all her medical expenses? My elderly clients with round-the-clock care plus co-pays and deductibles and insurance premiums and ... spend about $175,000 per year. Also, has she been paying tax each year on her savings bonds, or did she pay when they matured, so that none or only some of the $86,000 is taxable for 2016? Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 5, 2017 Report Share Posted March 5, 2017 11 hours ago, StevenL said: Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000). Is there anyway she can exclude all or some of the income on her tax return? No, there is no savings bond interest exclusion for medical expenses. 2 Quote Link to comment Share on other sites More sharing options...
StevenL Posted March 5, 2017 Author Report Share Posted March 5, 2017 8 hours ago, Lion EA said: Are you sure that's all her medical expenses? My elderly clients with round-the-clock care plus co-pays and deductibles and insurance premiums and ... spend about $175,000 per year. Also, has she been paying tax each year on her savings bonds, or did she pay when they matured, so that none or only some of the $86,000 is taxable for 2016? Her daughter is handling her finances for her. She said the $26,000 was what she had for medical expenses. I will have double check, with her, but it is consistent to what she's had in the past. All this interest was reported on 1099-INT box 3 so with no medical or senior citizen exclusion it looks like she'll have to pay. Thanks everyone for your help. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 6, 2017 Report Share Posted March 6, 2017 Don't mean to be insensitive but another case of folks making decisions and acting on them without consulting their tax advisor or accountant. 4 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 6, 2017 Report Share Posted March 6, 2017 On 3/4/2017 at 8:44 PM, StevenL said: Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000). On 3/5/2017 at 8:34 AM, StevenL said: Her daughter is handling her finances for her. She said the $26,000 was what she had for medical expenses. I will have double check, with her... 4 hours ago, Terry D said: Don't mean to be insensitive but another case of folks making decisions and acting on them without consulting their tax advisor or accountant. Don't mean to be insensitive either, but kids and other relatives don't consult us about money that belongs to someone else. Looks like daughter made provisions for a $60,000 cushion for taxes. 3 Quote Link to comment Share on other sites More sharing options...
Catherine Posted March 6, 2017 Report Share Posted March 6, 2017 6 hours ago, Terry D said: another case of folks making decisions and acting on them without consulting their tax advisor or accountant But I am *sure* they asked the barber's brother in law! He said it was fine, and he knows WAY more than any of us do... doesn't he? 5 Quote Link to comment Share on other sites More sharing options...
BulldogTom Posted March 6, 2017 Report Share Posted March 6, 2017 6 hours ago, Catherine said: But I am *sure* they asked the barber's brother in law! He said it was fine, and he knows WAY more than any of us do... doesn't he? We need to get Betty Sue and Jerome back on the board. They are real smart and could give us the answer lickity split. Tom Newark, CA 4 Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 7, 2017 Report Share Posted March 7, 2017 Maybe the daughter drove her mom to and from the doctor a lot during the year. That's the ONLY thing I can possibly think of which would require $86,000 to cover $26,000 of medical expenses. 1 Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 7, 2017 Report Share Posted March 7, 2017 If the interest was $86,000 that means the total cashed in had to be at least $172,000, unless the bonds had not matured. But still, there would have been some principal. Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 7, 2017 Report Share Posted March 7, 2017 18 minutes ago, Gail in Virginia said: If the interest was $86,000 that means the total cashed in had to be at least $172,000, unless the bonds had not matured. But still, there would have been some principal. Yes, there had to be principal in there, for sure, but it's not uncommon for there to be much more interest than principal. I just looked up a $5,000 series EE bond issued 10/1986. It would have been purchased for $2,500 and the accumulated interest would be $9,032 when it matured 10/2016. So, yeah daughter had more than $60,000 left after paying the medical expenses. For sure. 1 Quote Link to comment Share on other sites More sharing options...
JohnH Posted March 7, 2017 Report Share Posted March 7, 2017 I still think the medical travel provided by the daughter is the most likely answer, and accounts for all the money. You can't have medical travel without a car. The math works like this: Amount received. $86,000 Less med exp: (26,000) Sub-total: 60,000 Less one car: (60,000) Net received: - 0 - 4 Quote Link to comment Share on other sites More sharing options...
RitaB Posted March 7, 2017 Report Share Posted March 7, 2017 21 minutes ago, JohnH said: I still think the medical travel provided by the daughter is the most likely answer, and accounts for all the money. You can't have medical travel without a car. The math works like this: Amount received. $86,000 Less med exp: (26,000) Sub-total: 60,000 Less one car: (60,000) Net received: - 0 - Crying. And THAT'S how we do math around here! Give me my roses while I'm here. (And my inheritance.) The principal went toward meals and incidentals. (Clothes and vacations.) (Steven, don't get offended at us, we're just playing.) 3 Quote Link to comment Share on other sites More sharing options...
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