From the Financial Hotline
By: Financial Hotline
Fall 2024 (Vol. 42, No. 3)
Q: If I itemize, can I claim Medicare Health Insurance premiums as part of my qualifying medical expenses?
A: If you pay premiums for Medicare health insurance, you may be able to combine them with other qualifying expenses and claim them as an itemized deduction for medical expenses on your tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans, which cover some costs that Medicare Parts A and B don’t cover. Generally, you can deduct medical expenses only if you itemize deductions and only to the extent that total qualifying health care expenses exceeded 7.5% of your adjusted gross income. But, if you’re self-employed or a shareholder-employee of an S corporation, you can generally claim an above-the-line deduction for your health insurance premiums, including Medicare premiums. That means it’s not necessary for you to itemize deductions to get the tax savings.
Q: Can I purchase tax credits as an investment?
A: Yes. Both individuals and entities can purchase tax credits to lower their tax liability. These investments offer a nonrefundable credit which means it will reduce your tax bill dollar for dollar down to zero, but no further. The taxpayer would forfeit any amount of credit greater than the amount owed. Let’s say you owe a tax bill of $50,000 and you purchase $50,000 in tax.
These credits could reduce your tax due to zero. Most opportunities will require a minimum purchase, so this strategy is generally attractive to those wanting to avoid a sizeable tax bill.
Most tax credits can be purchased at a discount for immediate savings, but they also offer the opportunity to support beneficial projects. Many tax credits are created to encourage investment in renewable energy, historic preservation or affordable housing. For investors, buying tax credits can also add diversity to their portfolio. Companies like Crux, Nepsis and Moss Adams can offer more information on these types of transactions.
Q: I am fighting a chronic illness and drowning in debt. Should I give in to one of the many debt settlement companies contacting me?
A: No. Using a debt settlement company may hurt your chances of settling. Many creditors have adopted the policy of refusing to work with these companies. A debt settlement company charges around 20% to 25% of the amount settled for their services. So, if you settle $40,000 in debt for $20,000 it could end up costing you an extra $5,000 to have a company do what you have a better chance of accomplishing on your own. It is possible to negotiate directly with your creditors. Many have a hardship assistance program. If you find the task too daunting, you may consider contacting a certified nonprofit credit counselor for guidance.
Q: I see advertisements for free government debt relief programs. Are these legit?
A: There are no laws or government programs that offer free debt relief. Be wary of unsolicited calls or contact from anyone offering to help you eliminate your debt. Never pay upfront and do not share your personal information with any of these companies.
Q: My homeowner’s insurance went up substantially this year. What insurer offers the cheapest premiums?
A: The cost of insuring anything anywhere has increased in most parts of the United States and many are facing higher costs again this year. Insurance rates will vary greatly according to your specific location. Some companies known for lower rates include USAA, Auto-Owners, Progressive, Erie and Tower Hill. Some online sites that help you shop and compare rates include: Compare.com, PolicyGenius.com, Insurify.com and TheZebra.com
Q: Can anyone sell a put option?
A: First, you would need a brokerage account that is approved to trade options. Most financial institutions will require you to request and be approved to trade. A put option is a contract that gives the buyer the right to sell a specified amount of stock at a predetermined price within a specific time period. The buyer does not have to buy but they pay the seller a set price for that option.
Q: What is the COLA increase for Social Security in 2025?
A: Everyone collecting Social Security will get a 2.5% cost of living increase in 2025, down from 2.6% in 2024. In other news, the maximum amount of income that is subject to Social Security Tax increases to $176,100 which is an increase from $168,000. The changes go in effect January, 1, 2025.